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 Problems

The Balance Sheet

1 Prepare a December 31 balance sheet using the following data:

Cash $ 4,000

Patents 82,000

Accounts payable 6,000

Accounts receivable 8,000

Taxes payable 2,000

Machinery 34,000

Bonds payable 7,000

Accumulated retained

earnings 6,000

Capital surplus 19,000

The par value of the firm’s common stock is $100.

1

Assets

Current assets

Cash $ 4,000

Accounts receivable 8,000

Total current assets $ 12,000

Fixed assets

Machinery $ 34,000

Patents 82,000

Total fixed assets $116,000

Total assets $128,000

Liabilities and equity

Current liabilities

Accounts payable $ 6,000

Taxes payable 2,000

Total current liabilities $ 8,000

Long-term liabilities

Bonds payable $7,000

Stockholders equity

Common stock ($100 par) $ 88,000

Capital surplus 19,000

Retained earnings 6,000

Total stockholders equity $113,000

Total liabilities and equity $128,000

2 The following table presents the long-term liabilities and stockholders’ equity of Information Control Corp. of one year ago.

Long-term debt $50,000,000

Preferred stock 30,000,000

Common stock 100,000,000

Retained earnings 20,000,000

During 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 Statement

2

One year ago Today

Long-term debt $50,000,000 $50,000,000

Preferred stock 30,000,000 30,000,000

Common stock 100,000,000 110,000,000

Retained earnings 20,000,000 22,000,000

Total $200,000,000 $212,000,000

3 Prepare an income statement using the following data.

Sales $500,000

Cost of goods sold 200,000

Administrative expenses 100,000

Interest expense 50,000

The firm’s tax rate is 34 percent.

3

Income Statement

Total operating revenues $500,000

Less: Cost of goods sold $200,000

Administrative expenses 100,000 300,000

Earnings before interest and taxes $200,000

Less: Interest expense 50,000

Earnings before Taxes $150,000

Taxes 51,000

Net income $99,000

4 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 20X1

Net sales $800,000 $500,000

Cost of goods sold 560,000 320,000

Operating expenses 75,000 56,000

Depreciation 300,000 200,000

Tax rate (%) 30 30

a. Prepare an income statement for each year.

b. Determine the operating cash flow during each year.

Financial Cash Flow

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