公司理财第2章

Concept Questions◆What is the balance-sheet equation?Assets = Liabilities + Stockholders' equity◆What three things should be kept in mind when looking at a balance sheet?Accounting liquidity, debt vs. equity, and value vs. cost.◆What is the income statement equation?Revenue - expenses = Income◆What are the three things to keep in mind when looking at an income statement?Generally Accepted Accounting Principles (GAAP), noncash items, and time and costs.◆What are noncash expenses?Noncash expenses are items included as expenses but which do not directly affect cash flow. The most important one is depreciation.◆What is net working capital?It is the difference between current assets and current liabilities.◆What is the change in net working capital?To determine changes in net working capital you subtract uses of net working capital from sources of net working capital.◆How is cash flow different from changes in net working capital?The difference between cash flow and changes in new working capital is that some transactions affect cash flow and not net working capital. The acquisition of inventories with cash is a good example of a change in working capital requirements.◆What is the difference between operating cash flow and total cash flow of the firm?The main difference between the two is capital spending and additions to working capital, that is, investment in fixed assets and "investment" in working capital.Questions And ProblemsThe Balance Sheet1 Prepare a December 31 balance sheet using the following data:Cash $ 4,000Patents 82,000Accounts payable 6,000Accounts receivable 8,000Taxes payable 2,000Machinery 34,000Bonds payable 7,000Accumulated retainedearnings 6,000Capital surplus 19,000The par value of the firm’s common stock is $100.1AssetsCurrent assetsCash $ 4,000Accounts receivable 8,000Total current assets $ 12,000Fixed assetsMachinery $ 34,000Patents 82,000Total fixed assets $116,000Total assets $128,000Liabilities and equityCurrent liabilitiesAccounts payable $ 6,000Taxes payable 2,000Total current liabilities $ 8,000Long-term liabilitiesBonds payable $7,000Stockholders equityCommon stock ($100 par) $ 88,000Capital surplus 19,000Retained earnings 6,000Total stockholders equity $113,000Total liabilities and equity $128,0002 The following table presents the long-term liabilities and stockholders’ equity of Information Control Corp. of one year ago.Long-term debt $50,000,000Preferred stock 30,000,000Common stock 100,000,000Retained earnings 20,000,000During the past year, Information Control issued $10 million of new common stock. The firm generated $5 million of net income and paid $3 million of dividends. Construct today’s balance sheet reflecting the changes that occurred at Information Control Corp. during the year.The Income Statement2One year ago TodayLong-term debt $50,000,000 $50,000,000Preferred stock 30,000,000 30,000,000Common stock 100,000,000 110,000,000Retained earnings 20,000,000 22,000,000Total $200,000,000 $212,000,0003 Prepare an income statement using the following data.Sales $500,000Cost of goods sold 200,000Administrative expenses 100,000Interest expense 50,000The firm’s tax rate is 34 percent.3Income StatementTotal operating revenues $500,000Less: Cost of goods sold $200,000Administrative expenses 100,000 300,000Earnings before interest and taxes $200,000Less: Interest expense 50,000Earnings before Taxes $150,000Taxes 51,000Net income $99,0004 The Flying Lion Corporation reported the following data on the income statement of one of its divisions. Flying Lion Corporation has other profitable divisions.20X2 20X1Net sales $800,000 $500,000Cost of goods sold 560,000 320,000Operating expenses 75,000 56,000Depreciation 300,000 200,000Tax rate (%) 30 30a. Prepare an income statement for each year.b. Determine the operating cash flow during each year.Financial Cash Flow4a.Income StatementThe Flying Lion Corporation19X1 19X2Net sales $800,000 $500,000Cost of goods sold (560,000) (320,000)Operating expenses (75,000) (56,000)Depreciation (300,000) (200,000)Earnings before taxes$(135,000) $(76,000)Taxes* 40,500 22,800Net income $(94,500) $(53,200)* The problem states that Flying Lion has other profitable operations. Flying Lion can take advantage of tax losses by deducting the tax liabilities in the other operations that have taxable profits. If Flying Lion did not have other operations and tax losses could not be carried forward or backward, then taxes in each of these years would have been zero.b. Cash flow during 19X2 = -$94,500 + $300,000 = $205,500Cash flow during 19X1 = -$53,200 + $200,000 = $146,8005 What are the differences between accounting profit and cash flow?5 The main difference between accounting profit and cash flow is that non-cash costs, such as depreciation expense, are included in accounting profits. Cash flows do not consider costs that do not represent actual expenditures. Cash flows deduct the entire cost of an investment at the time the cash flow occurs.6 During 1998, the Senbet Discount Tire Company had gross sales of $1 million. The firm’s costof goods sold and selling expenses were $300,000 and $200,000, respectively. These figures donot include depreciation. Senbet also had notes payable of $1 million. These notes carried aninterest rate of 10 percent. Depreciation was $100,000. Senbet’s tax rate in 1998 was 35 percent.a. What was Senbet’s net operating income?b. What were the firm’s earnings before taxes?c. What was Senbet’s net income?d. What was Senbet’s operating cash flow?6 a. Net operating income = Sales - Cost of goods sold - Selling expenses - Depreciation= $1,000,000 - $300,000 - $200,000 - $100,000= $400,000b. Earnings before taxes = Net operating income - Interest expense= $400,000 - 0.1 ($1,000,000)= $300,000c. Net income = Earnings before taxes - Taxes= $300,000 - 0.35 ($300,000)= $195,000d. Cash flow = Net income + Depreciation + Interest expense= $195,000 + $100,000 + $100,000= $395,0007 The Stancil Corporation provided the following current information.Proceeds from short-term borrowing $ 6,000Proceeds from long-term borrowing 20,000Proceeds from the sale of common stock 1,000Purchases of fixed assets 1,000Purchases of inventories 4,000Payment of dividends 22,000Determine the cash flow for the Stancil Corporation.7Statement of Cash FlowsThe Stancil CompanyCash flows from the firmCapital spending $(1,000)Additions to working capital (4,000)Total $(5,000)Cash flows to investors of the firmShort-term debt $(6,000)Long-term debt (20,000)Equity (Dividend - Financing) 21,000Total $(5,000)8 Ritter Corporation’s accountants prepared the following financial statements for year-end 20X2.RITTER CORPORATIONb. Determine the cash flow during the year 20X2.8 a. The changes in net working capital can be computed from:Sources of net working capitalNet income $100Depreciation 50Increases in long-term debt 75Total sources $225Uses of net working capitalDividends $50Increases in fixed assets* 150Total uses $200Additions to net working capital $25*Includes $50 of depreciation.b.Cash flow from the firmOperating cash flow $150Capital spending (150)Additions to net working capital (25)Total $(25)Cash flow to the investorsDebt $(75)Equity 50Total $(25)。