Given the following financial statements for your firm answer the questions given at below:
|
Income Statement for years |
||
|
Year 2 |
Year 1 |
|
|
Sales |
$5,500 |
$5,000 |
|
Operating Costs excluding Depreciation and Amortization |
4,675 |
4,250 |
|
EBITDA |
825 |
750 |
|
Depreciation and Amortization |
190 |
180 |
|
EBIT |
$635 |
$570 |
|
Interest Expense |
62 |
50 |
|
EBT |
$573 |
$520 |
|
Taxes (40%) |
229 |
208 |
|
NI |
$344 |
$312 |
|
Balance Sheet for years ending December 31 |
||
|
Year 2 |
Year 1 |
|
|
Assets: |
||
|
Cash |
$275 |
$250 |
|
Short Term Investments |
55 |
50 |
|
Accounts Receivable |
1,375 |
1,250 |
|
Inventories |
825 |
750 |
|
Total Current Assets |
$2,530 |
$2,300 |
|
Net Plant and Equipment |
1,925 |
1,750 |
|
Total Assets |
$4,455 |
$4,050 |
|
Liabilities: |
||
|
Notes Payable |
$192 |
$100 |
|
Accounts Payable |
580 |
500 |
|
Miscellaneous Payables |
245 |
250 |
|
Total Current Liabilities |
$1,017 |
$850 |
|
Long-Term Debt |
550 |
500 |
|
Total Liabilities |
$1,567 |
$1,350 |
|
Common Stock |
2154 |
2,200 |
|
Retained Earnings |
734 |
500 |
|
Less Treasury Stock |
46 |
0 |
|
Total Shareholder Equity |
$2,888 |
$2,700 |
|
Liabilities and Shareholder Equity |
$4,455 |
$4,050 |
|
Cash Flow Statement for year ending December 31, Year 2 |
|
|
Operating Activities |
|
|
Net Income |
$344 |
|
Depreciation and Amortization |
190 |
|
Increase in Accounts Receivables |
(125) |
|
Increase in Inventories |
(75) |
|
Increase in Accounts Payables |
80 |
|
Decrease in Miscellaneous Payables |
(5) |
|
Net Cash Provided by Operations |
409 |
|
Investing Activities |
|
|
Purchase of equipment |
(365) |
|
Increase in Short Term Investments |
(5) |
|
Net Cash Used for Investment Activities |
(370) |
|
Financing Activities |
|
|
Dividends paid |
(110) |
|
Increase in Notes Payable |
92 |
|
Increase in Long Term Debt |
50 |
|
Purchase stock for Treasury |
(46) |
|
Net Cash used for Financing Activities |
(14) |
|
Beginning Cash Balance January 1, 2010 |
250 |
|
Ending Cash Balance December 31, 2010 |
275 |
|
Net Cash Flow |
$25 |
1. What are the company’s current ratio and debt ratio for both years? What does the trend in these ratios tell you about the company’s liquidity and solvency?
2. In year 2, net cash increased by 25. What does the statement of cash flows tell you about the firm’s ability to generate cash?
3. Develop and analyze the results of an extended DuPont equation based on the two years of data above.
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