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Chapter-4 cashflow exercise
Financial Report Analysis (Học viện Ngân hàng)
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Chapter 4. Understanding the Cash flow statement
1. From the following table:
Item
Amount
Cash payment of dividends
$30
F
Sale of equipment
$10
I
Net income
$25
F
X
Purchase of land
$15
I
Increase in account payable
$20
O
Sale of preferred stock
$25
F
Increase in deferred taxes
$5
O
Profit on sale of equipment
$15
I
Determine the cash flow from financing activities 30 25 5= 80
2. Financial information of ABC corp. for the year ended December 31 st, was as follows:
Items
Amount
Sales
$3,000,00
0
Purchases
1,800,000
Inventory at beginning
500,000
Inventory at Ending
800,000
300
Account receivable at beginning
300,000
Account receivable at ending
200,000
-100
Account payable at beginning
100,000
Account payable at ending
100,000
0
Other operating expenses paid
400,000
-400
Based upon this data and using the direct method, what was ABC corp.’s cash flow from
operations for the year ended December 31st? 1200
Cash received from customers
Revenue: 3000
Add: Decrease in receivable: 100
Cash received from customer: 3100
-Cash paid to suppliers
Purchases
1800
Plus: Increase in inventory
300
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Purchases from suppliers
2100
Plus: Decrease in payable
0
Cash paid to supplier
2100
-Cash paid for other operating expenses:
Other operating expenses
400
Total operating cash flow:
-Cash received from customer:
3100
-Cash paid to supplier
(2100)
-Other operating expenses
(400)
Net operating CF
600
3. A firm has net sale of $3,500, earnings after taxes of $1,000, depreciation expense of
$500, cost of goods sold of $1,500, and cash taxes of $500. Also, inventory decrease by
$100, and accounts receivable increased by $300. What is the firm’s cash flow from
operations?
Indirect Method:
Earning after tax (EAT): +1,000 (NI)
Depreciation: +500
Change in Inventory: + 100
Change in Account Receivable: - 300
CFO = +1,00 + 500 + 100 - 300 = 1,300
Direct Method:
Net Sales: 3,500 (revenue)
Change in Account Receivable: - 300
COGS: - 1,500
Cash Taxes: - 500
Change in Inventory: +100
CFO = 3,500 - 300 - 1,500 - 500 + 100
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= 1,300
4. Use the following financial data for XYZ Corp., calculate the cash flow from
operations using the indirect method.
Items
Net income
Increase in account receivable
Decrease in inventory
Depreciation
Decrease in accounts payable
Increase in wages payable
Decrease in deferred taxes
Purchase of new equipment
Dividend paid
Net income: $225
Amount
$225
55
33
65
25
15
10
65
75
-Adjustment to accural-basis net income
Increase in receivable: - 55
Decrease in inventory: + 33
Depreciation: + 65
Decrease in payable: - 25
Increase in wages payable: + 15
Decrease in deferred taxes: - 10
Total adjustmnet: 23
CFO = 225 - 55 + 33 + 65 - 25 + 15 - 10 = $248.
5. Solar Industries’ income statement and related notes for the year ended December 31 st
are as follows (in $):
Items
Sales
COGS
Wages expense
Depreciation expense
Interest expense
Income tax expense
Net income
Amount
42,000,000
(32,000,000)
(1,500,000)
(2,500,000)
(1,000,000)
(2,000,000)
3,000,000
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During the year:
-
Wages payable increased $100,000
Accumulated Depreciation increased $2,500,000
Interest payable decreased $200,000
Income taxes payable increased $500,000
Dividends of $100,000 were declared and paid
Calculate the cash flow from operation of this company.
-Net income: 3000
-Adjustment to accural-basis net income
Wages payable increased: 100
Depreciation increased: 2500
Interest payable decreased: (200)
Income taxes payable increased: 500
Total adjustment
2900
Net cash flow by operating activities 5900
6. BoA company’s financial statements for the year ended December 31, 20X7 were as
follows (in $ millions):
Income statement
Sales
COGS
Wages expense
Interest expense
Depreciation
Gain on sale of equipment
Income tax expense
Net income
150
(48)
(56)
(12)
(22)
6
(8)
10
Balance sheet
Cash
Account receivable
31-Dec-X6 31-Dec-X7
32
52
18
22
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Inventory
46
44
PP & E (net)
182
160
Total assets
278
278
Account payable
28
33
Long-term debt
145
135
Common stock
70
70
Retained earnings
35
40
Total Liabilities & equity
278
278
Calculate the cash flow from operations for BoA Company for the year ended Dec 31 st,
20X7 (in $ millions)?
7. A company has the following changes in its balance sheet accounts:
Net sales
$500
An increase in account receivable
20
A decrease in accounts payable
40
An increase in inventory
30
Sale of common stock
100
Repayment of debt
10
Depreciation
2
Net income
100
Interest expense on debt
5
Calculate the company’s cash flow from financing?
Cash flow from finaning activities
Sale of common stock
100
Repayment of debt
-10
Net cash flow from financing 90
8. Mulbery corp. reported the following revenues and expenses for the year ended 2017:
Sale revenue
$200,000
Wage expense
89,000
Insurance expense
17,000
Interest expense
10,400
Depreciation
50,000
expense
Following are the related balance sheet accounts:
2017
2016
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Unearned revenue
$15,600 $13,200
Wages payable
5,400
6,600
Prepaid insurance
1,200
0
Interest payable
500
1,600
Accumulated
95,000 45,000
depreciation
Calculate cash collections and cash expenses.
Direct Method:
Cash receipts (Cash collections)
-Sale revenue: + 200,000
-Unearned revenue: 15,600 - 13,200 = + 2,400
→ Cash receipts = 200,000 + 2,400 = + 202,400
Cash payments (Cash expenses)
-Wages expenses: 89,000
-Wages payable: 6,600 - 5,400 = 1,200
-Insurance expense: 17,000
-Prepaid insurance: 0 - 1,200 = - 1,200
-Interest expense: 10,400
-Interest payable: 1,600 - 500 = 1,100
→ Cash payments = 89,000 + 1,200 + 17,000 - 1,200 + 10,400 + 1,100 = 119,900
9. An analyst has gathered the following information about a company:
Income statement for the year 20X7
Sales
Expenses
COGS
Depreciation
Interest expenses
Total expenses
Income from cont. op.
Gain on sale
Income before tax
$1,500
$1,300
30
40
1,370
130
30
160
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Income tax
Net income
64
$96
Additional information:
Dividend paid
Common stock sold
Equipment purchased
Bonds issued
Fixed asset sold for (original cost of $100 with accumulated
depreciation of $70)
Account receivable decreased by
Inventory decreased by
Accounts payable increased by
Wages payable decreased by
What is the cash flow from operations?
$30
20
50
80
60
30
20
20
10
Adjustment to accrual – basis net income
- Depreciation: 30
- Gain on sale of fixed asset: (30)
- Account receivable decreased: 30
- Inventory decreased: 20
- Account payable increased: 20
- Wage payable decreased: (10)
Total adjustment: 60
Net CF provided from operating activities: 15
10. ABC company, a newly established firm has the cash flow statement for the year
end 2022. (unit of measurement: $000)
Cash collection from customers
4000
Cash paid to suppliers 3000
Cash operating expenses 1500
Cash taxes paid 100
Cash flow from operating activities
???
Cash paid for PP&E 2000
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Cash interest received 200
Cash flow from investing activities
???
Cash received from short-term debt issuance 300
Cash received from long-term debt issuance 500
Cash flow from financing activities
???
a. Calculating the CFO, CFI, CFF
b. Why CFO was negative? Does it indicate good financial situation?
c. The company dis buy or sell asset? Is the firm expanding? If yes, which source of
cash did the firm used to expand?
d. The firm raise or repay capital? Why
e. How to improve the financial situation of the firm
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