Unit 2 Exercise Questions Flamingo, Inc. 2019 statement of comprehensive income ($ in millions) Net sales Less: Cost of goods sold Less: Depreciation Eamings before interest and taxes Less: Interest paid Taxable income Less: Taxes Net income Addition to retained earnings Dividends paid $1,384 605 180 599 80 519 156 $363 $254 109 Cash Accounts rec. Inventory Total Net fixed assets Flamingo, Inc. 2018 and 2019 Statement of financial positions ($ in millions) 2018 2019 $100 $121 Accounts payable 350 425 Notes payable 440 410 Total $890 $956 Long-term debt 1,556 1,704 Owner's equity Common stock Retained learnings 2018 $400 390 $790 500 2019 $350 370 $720 550 600 580 810 556 $234 Dividends paid 109 Cash Accounts rec. Inventory Total Net fixed assets Flamingo, Inc. 2018 and 2019 Statement of financial positions ($ in millions) 2018 2019 2018 $100 $121 Accounts payable $400 350 425 Notes payable 390 440 410 Total $790 $890 $956 Long-term debt 500 1,556 1,704 Owner's equity Common stock 600 Retained 556 earnings Total 1,156 $2,446 $2,660 Total liabilities $2,446 2019 $350 370 $720 550 580 810 Total assets 1,390 $2.660 Q1. Show detailed calculations of CFFA under two approaches we have discussed in our class. (60 marks) Q2. Comment on the cashflow performance of the company in the years of 2018 and 2019.(20 marks) Q3. If you were to advise Flamingo Inc. for the year 2020. what recommendations would you propose regarding the capital structure of the company? Why? (20 marks) Unit 2 Exercise Questions Flamingo, Inc. 2019 statement of comprehensive income ($ in millions) Net sales Less: Cost of goods sold Less: Depreciation Eamings before interest and taxes Less: Interest paid Taxable income Less: Taxes Net income Addition to retained earnings Dividends paid $1,384 605 180 599 80 519 156 $363 $254 109 Cash Accounts rec. Inventory Total Net fixed assets Flamingo, Inc. 2018 and 2019 Statement of financial positions ($ in millions) 2018 2019 $100 $121 Accounts payable 350 425 Notes payable 440 410 Total $890 $956 Long-term debt 1,556 1,704 Owner's equity Common stock Retained learnings 2018 $400 390 $790 500 2019 $350 370 $720 550 600 580 810 556 $234 Dividends paid 109 Cash Accounts rec. Inventory Total Net fixed assets Flamingo, Inc. 2018 and 2019 Statement of financial positions ($ in millions) 2018 2019 2018 $100 $121 Accounts payable $400 350 425 Notes payable 390 440 410 Total $790 $890 $956 Long-term debt 500 1,556 1,704 Owner's equity Common stock 600 Retained 556 earnings Total 1,156 $2,446 $2,660 Total liabilities $2,446 2019 $350 370 $720 550 580 810 Total assets 1,390 $2.660 Q1. Show detailed calculations of CFFA under two approaches we have discussed in our class. (60 marks) Q2. Comment on the cashflow performance of the company in the years of 2018 and 2019.(20 marks) Q3. If you were to advise Flamingo Inc. for the year 2020. what recommendations would you propose regarding the capital structure of the company? Why? (20 marks)
