The Davidson Corporation’s balance sheet and income statement are given here:

Davidson Corporation: Balance Sheet as of December 31, 2005

(Millions of Dollars)

Assets Liabilities and Equity

Cash and equivalents $ 15 Accounts payable $ 120

Accounts receivable 515 Notes payable 220

Inventories 880 Accruals 280

Total current assets $1,410 Total current liabilities $ 620

Net plant and equipment 2,590 Long-term bonds 1,520

Total debt $2,140

Common stock

(100 million shares) 260

Retained earnings 1,600

Common equity $1,860

Total assets $4,000 Total liabilities and equity $4,000

Davidson Corporation: Income Statement for Year Ending December 31, 2005

(Millions of Dollars)

Sales $6,250

Operating costs excluding depreciation and amortization 5,230

EBITDA $1,020

Depreciation and amortization 220

EBIT $ 800

Interest 180

EBT $ 620

Taxes (40%) 248

Net income $ 372
Common dividends paid $ 146

Earnings per share $ 3.72

a. All revenues were received in cash during the year and all costs except depreciation and amortization were paid in cash during the year. What was net cash flow? How was it different from reported accounting profit?

b. Construct the statement of retained earnings for December 31, 2005.

c. How much money has been reinvested in the firm over the years?

d. At the present time, how large a check could be written without it bouncing?

e. How much money must be paid to current creditors within the next year?