Question 1.

a.  Prepare a cash flow statement for the following information.

b.  Include a cash reconciliation statement.   

 

Balance Sheet

 

                                                                                                      Jan 1                                                  Dec 31

ASSETS:

Current Assets:

                Cash                                                                          310,000                                 600,000

                Marketable Securities                                         1,200,000                              1,000,000

                Accounts Receivable, net                                   290,000                                   330,000

                Inventory                                                              3,000,000                              4,000,000

                Prepaid Expenses                                                                   200,000                                 300,000

Total Current Assets                                                           5,000,000                              6,230,000

 

Total Fixed Assets, net                                                     2,500,000                                2,000,000

 

Total Assets                                                                      7,500,000                              8,230,000

 

 

 

 

 

 

 

 

 

LIABILITIES & EQUITIES

Current Liabilities:

                Accounts Payable                                                               1,500,000                              1,000,000

                Notes Payable                                                      1,000,000                             1,000,000

                Accrued Expenses                                                  500,000                                 800,000

Total Current Liabilities                                                   3,000,000                                2,800,000

 

Total Long-term Liabilities                                                1,000,000                              1,500,000

Total Liabilities                                                                  4,000,000                                4,300,000

 

Preferred Stock                                                                     500,000                                  500,000

Common Stock                                                                    500,000                                  500,000

Capital in Excess of Par                                                     1,000,000                              1,000,000                             

Retained Earnings                                                               1,500,000                              1,930,000

Total Stockholders Equity                                               3,500,000                                3,930,000

 

Total Liabilities and Equity                                             7,500,000                                8,230,000

 

Income Statement (for ques 1)

 

Sales                                                                       10,000,000

COGS                                                                      6,000,000

Gross Profit                                                            4,000,000

Administrative expenses                                      1,200,000

Depreciation                                                             500,000

EBIT                                                                       2,300,000

Interest Expense                                                     500,000

EBT                                                                         1,800,000

Taxes (40%)                                                              720,000

Net Income                                                            1,080,000

 

 

                                                                                   

 

 

Question 2                                                 Table 5-1

 

                                Income Statement                                                              Balance Sheet

 

Sales                                       $20,000,000                         Assets:

Cost of Goods Sold                 8,000,000                          Cash                                       $  5,000,000

                                                  12,000,000                         Marketable Securities           12,500,000

Selling and Administrative    1,600,000                          Accounts Receivable, net      2,500,000

Depreciation                            3,000,000                           Inventory                                30,000,000

                                                   7,400,000                           Prepaid Expenses                                  5,000,000

Interest                                     2.000,000                           Plant & Equipment               30,000,000

                                                   5,400,000                          

Taxes (40%)                            2,160,000                           Total Assets                           85,000,000

                                                   3,240,000                          

Common Stock Div.                 600,000                           Liabilities and Equity:

                                                 $2,640,000                          Accounts Payable                               $20,000,000

                                                                                                Notes Payable                           5,000,000

                                                                                                Accrued Expenses                    5,000,000

                                                                                                Bonds                                       25,000,000

                                                                                                Common Stock                        5,000,000

                                                                                                Capital in Excess of Par        10,000,000

                                                                                                Retained Earnings                   15,000,000

 

                                                                                                Total Liabilities and

                                                                                                Equity                                   $85,000,000

Shares outstanding of common stock = 1,000,000

Market price of common stock = $18.

 

Use Table 5-1 for the following 15 questions.

 

2-1.      The Current Ratio is: 

2-2.      The Net Profit margin is: 

2-3.      The Quick Ratio is:  

2-4.      The Times Interest Earned ratio is:  

2-5.      The Earnings Per Share is: 

2-6.      The Gross Profit Margin is:

2-7.      The Total Debt to Total Asset ratio is: 

2-8.      Return on Assets ratio is:

2-9.      The Total Asset Turnover ratio is: 

2-10.    The Operating Profit Margin is: 

2-11.    The Average Collection Period (365 day year) is:

2-12.    The Market to Book ratio is:

2-13.    The Debt to Equity ratio is: 

2-14.    The Inventory Turnover ratio is: 

2-15.    The Return on Equity is:

 

 

 

 

 

 

Question 3

 

Oleans, Inc. projects sales to be $100,000; $90,000; $95,000 during the months of

August, September, and October respectively.  Salaries are projected to be $12,000 plus

5% of sales.  Purchases are 50% of sales for the month and paid in the month of purchase.

A tax payment of $60,000 and an equipment purchase of $20,000 will be made in

September.  Transactions are for cash, and a ($20,000) cash balance starts the month

of August.  The firm maintains a minimum target end of month balance of $6,000.  There

is no limit as to how high the cash balance can be.

 

Calculate the ending cash balance after any deficit is financed to achieve the target level

for each of the three months.

 

 

Question 4

Following is the balance sheet for the end of the year 2013 for Silver Spurs, Inc.:

 

                                                                 2013                                   2014

 

            Current Assets                                        $15,000                  

            Net Fixed Assets                          20,000

            Total Assets                                $35,000

 

            Accounts Payable                       $ 2,000

            Notes Payable                                1,000

            Long-Term Debt                          10,000

            Common Equity                           22,000

            Total Liabilities/Equity              $35,000

 

            They have generated sales for 2013 of $35,000 resulting in net income of $15,000.  Due to the difficulty associated with acquiring raw materials, Silver Spurs has experienced sluggish business that has caused fixed assets to be underutilized.  Management thinks it can double sales in 2014 through the introduction of a new product.  No new fixed assets will be required and the dividend payout ratio will be 100%.  Assume no additional deprecation expense will be taken in 2014.  Project next year’s balance sheet in the space provided above to determine the additional funding needed (AFN) for this new product.  Assume notes payable at the end of 2013 are paid off in 2014.