FIN 3715 Chapter : Chapter 3 Fin Test Bank
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MG770- Financial Reporting, Financial Statement Analysis, andValuation
Homework Assignment
Week # 3
__________________________________________________________________________
Create the statement of cash-flow with indirectmethod
Interpret the result of the statement of cash flow withpercentage
Instruction:
[1] Please use the balance sheet as follows to classify eachactivity (operating, investing, and financing) from the column ofdifferent.
[2] please create a new statement of cash-flow from yourclassification on balance sheet.
[3] The statement of cash flow will be provided to measure thecompanyâs cash flow situation. Also, you need to interpret theresult of your measurement.
Balance sheet | ||||||
SILVERT CORPORATION | ||||||
Balance Sheet | ||||||
December 31 | ||||||
Different | Operating | Investing | Financing | |||
2012 | 2011 | |||||
ASSET | ||||||
Cash | $ 28,000 | $20,000 | $8,000 | |||
Receivable (net) | 70,000 | 62,000 | $8,000 | |||
Other current assets | 90,000 | 73,000 | $17,000 | |||
Long-term investment | 62,000 | 60,000 | $2,000 | |||
Plant and equipment (net) | 510,000 | 470,000 | $40,000 | |||
Total Assets | $760,000 | $685,000 | $75,000 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||
Current liabilities | $75,000 | $70,000 | $5,000 | |||
Long-term debt | 80,000 | 90,000 | ($10,000) | |||
Common stock | 330,000 | 300,000 | $30,000 | |||
Retained earnings | 275,000 | 225,000 | $50,000 | |||
Total liabilities and stockholdersâ equity | 760,000 | 685,000 | $75,000 | |||
]2] Create the statement of cash-flow by using the indirectmethod. Company has net income as starting point of $80,000.
STATEMENT OF CASH FLOW
Operating Activities | |
Net Income | $ 80,000 |
Cashflow from Operations | |
Investing Activities | |
Cashflow from Investing | |
Financing Activities | |
Cashflow from Financing |
FSU Manufacturing, Inc. has the following financial statements data for 2014:
Income Statement | Balance Sheet | |||
Sales | $102,500 | Cash | $40,000 | |
Cost of Goods | $50,000 | Fixed Assets | $55,000 | |
SG&E Expenses | $35,000 | Total Assets | $95,000 | |
EBIT | $17,500 | Accounts Payable | $12,000 | |
Interest Expense | $2,500 | Long-term Debt | $25,000 | |
Taxes | $6,000 | Retained Earnings | $28,000 | |
Net Income | $9,000 | Paid-in Common Equity | $30,000 |
Trait 1 | Use of financial statements | ||
1. | |||
a. | Compute the firmâs debt ratio and current ratio. | ||
b. | Is the firm profitable? Does the balance sheet balance? Explain. | ||
c. | If the firm paid $5,000 in dividends in 2014, what was its retained earnings balance at the end of 2013? (20 points) | ||
Trait 2 | Student relates financial ratios to improved business decisions | ||
2. | |||
a. | Compute the firmâs net profit margin, total asset turnover, and financial leverage multiplier (also known as the equity multiplier). | ||
b. | Explain what each of the three ratios above tells you about the firmâs performance and how they combine to form the firmâs return on equity. | ||
c. | The financial data for the firmâs major competitors show on average a net profit margin of 16%, total asset turnover of 1.25, but comparable leverage. Identify some possible business decisions that the firm could make so that it would be as attractive an investment as its competitors. |
1. Discuss the importance of financial statements and how they are used by businesses.
2. What is the basic format of the income statement and what is the relevance of the basic categories?
3. Cash flows for an organization come from operating activities and investment activities. Discuss the importance of each to the organization.
The Happy Auto Shop has the following annual information:
Gross Sales | $700,000 |
Net sales | $696,000 |
Gross profit | $448,000 |
What are the shopâs returns and allowances and cost of goods sold?
Construct a statement of financial position (balance sheet) for the Humperdink family using the following information:
cash | $50 |
Checking account | $2,500 |
student loan balance | $6,000 |
stocks and bonds | $2,600 |
savings account | $5,850 |
residence | $110,000 |
automobile | $12,000 |
savings account | $5,800 |
automobile loan balance | $12,000 |
401K retirement account | $15,000 |
furniture, clothing, jewelry | $8,000 |
credit card balance | $4,000 |
mortgage loan balance | $99,000 |
What is the purpose of financial statement analysis? How do the three types of financial statement analysis differ from each other and when is each used?
Samantha Knight is applying for a small-business loan. She provides the bank with the following information:
cash in checking accounts | $5,000 |
cash in savings | $10,350 |
home market value | $145,500 |
first mortgage on house | $25,000 |
home equity loan limit | $70,000 |
home equity loan | $10,000 |
automobile market value | $19,000 |
automobile loan outstanding | $15,000 |
credit card debt | $1,500 |
Calculate the debt-to-asset ratio.
Calculate the debt-to-equity ratio.
What percentage of Samantha's assets is owned by others?
Given the profit loss (income statement) and balance sheet for Sam's Sandwich Delivery (Table 4-8, page 121 of your textbook), answer the following:
Calculate the following ratios: current, quick, accounts receivable turnover, fixed asset turnover.
Using the inventory figure on the balance sheet as average inventory, calculate the inventory turnover ratio.
Calculate the debt-to-equity ratio, debt-to-total asset ratio, and operating profit margin ratio.
Perform a vertical analysis of the income statement.
Perform a vertical analysis of the balance sheet.
Based on your analysis, would you consider investing in Sam's Sandwich Delivery?