Financial Statements and Cash Flow

Financial Statements Analysis

 PROBLEM 1 (STATEMENT OF FINANCIAL POSITION)
The assets of Cain & Abel Associates consist
entirely of current assets and net plant and
equipment. The firm has total assets of
2.5 million, and net plant and equipment of
2 million. It has notes payable of 150,000,
long-term debt of 750,000, and total
common equity of 1.5 million. The firm
does have accounts payable and accruals
on its statement of financial position. The
firm only finances with debt and common
equity, so it has no preferred stock on its
statement of financial position.
Required:
a. Total liabilities and equity
b. Balance of current assets
c. Amount of accounts payable and accruals
d. Balance of current liabilities
e. Net working capital
f. Net operating working capital
 PROBLEM 2 (STATEMENT OF STOCKHOLDERS’ EQUITY)

In its most recent financial statements,

Harvest Inc. reported 50 million of net
income and 810 million of retained
earnings. The previous retained
earnings were 780 million.

Required: How much dividends were

paid to the shareholders during the
year?
 PROBLEM 3 (INCOME STATEMENT)

Good Shepherd Shop had sales of

700,000 in 2015 and cost of goods sold
represented 70 percent of sales. Selling
and administrative expenses were 12
percent of sales. Depreciation expense
was 10,000 and interest expense for the
year was 8,000. The firm’s tax rate is 30
percent.
Required: Compute earnings after taxes.
 PROBLEM 4 (STATEMENT OF CASH FLOWS)
The following information is available for Abraham’s Jewelry
and Gift Store:
Net Income---------------------------------------------5,000
Depreciation Expense---------------------------------2,500
Increase in deferred tax liabilities---------------------500
Decrease in cash---------------------------------------3,000
Increase in marketable securities--------------------1,000
Decrease in accounts receivable---------------------2,000
Increase in inventories--------------------------------9,000
Decrease in accounts payable------------------------5,000
Increase in accrued liabilities------------------------1,000
Increase in property and equipment---------------14,000
Increase in short-term notes payable--------------19,000
Decrease in long-term notes payable---------------4,000
Required:
a. Net cash flow from operating activities
b. Net cash flow from investing activities
c. Net cash flow from financing activities
d. Change in cash
 PROBLEM 5 (FREE CASH FLOW)
You are considering an investment in Kingdom
Corporation and want to evaluate the firm’s free cash
flow. From the income statement, you see that East
Corporation earned an EBIT of 62 million, paid taxes
of 17 million, and its depreciation expense was 5
million. Fixed assets increased by 32 million from
2018 to 2019. The firm’s current assets increased by
20 million and current liabilities increased by 12
million. Calculate Kingdom Corporation’s free cash
flow for 2019.
 PROBLEM 6 (ECONOMIC VALUE ADDED)
The following year-end data pertain to Adam
Corporation:
EBIT---------------------------800,000
Current assets---------------800,000
Non-current assets-------3,200,000
Current liabilities-----------400,000
Non-current liabilities---1,000,000
Income tax rate------------30%
Cost of capital--------------10%
Required: Compute for the Economic Value
Added (EVA).