AFM101 Lecture Notes - Lecture 2: Retained Earnings, A Question Of Balance, Share Capital
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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 thecompanyĆ¢ĀĀs 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 stockholdersĆ¢ĀĀ 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 |
Based on the financial information provided, calculate thefollowing ratios and explain their purpose:
Current Ratio
Inventory Turnover Ratio
Accounts Receivable Turnover Ratio Debt to Equity Ratio
Return on Assets Ratio
Asset Turnover Ratio
Return on Equity Ratio
Profit Margin Ratio
Price-Earnings Ratio
Dividend Yield Ratio
Note: When a balance sheet amount is related toan income statement amount in computing a ratio, the balance sheetamount should be an average of that period. The average iscalculated by adding the ending balances of this year and last yearand dividing the result by 2. Describe how a bank lending officermight use ratio analysis. Select five ratios that would be mostuseful for the purpose and explain the rationale for yourselection.
12/31/10 | 12/31/09 | |
Amount in Dollars | Amount in Dollars | |
Cash | 200.00 | 150.00 |
Receivables | 500.00 | 350.00 |
Inventories | 750.00 | 755.00 |
Other Current Assets | 100.00 | 75.00 |
Total Current Assets | 1,550.00 | 1,330.00 |
Plant and Equipment | 1,100.00 | 1,170.00 |
Other Long - Term Assets | 150.00 | 100.00 |
Total Assets | 2,800.00 | 2,600.00 |
Accounts Payable | 510.00 | 400.00 |
Other Current Liabilities | 25.00 | 25.00 |
Total Current Liabilities | 535.00 | 425.00 |
Long Term Debt | 375.00 | 400.00 |
Other Long Term Liabilities | 225.00 | 175.00 |
Preferred Stock | 250.00 | 250.00 |
Shareholders' Equity | 1,415.00 | 1,350.00 |
Total Liabilities and Shareholders' Equity | 2,800.00 | 2,600.00 |
Year-2010 | Year-2009 | |
Amount in Dollars | ||
Net Sales | 3500.00 | 3200.00 |
Cost of Goods Sold | 2200.00 | 2100.00 |
Other Expenses | 300.00 | 250.00 |
Depreciation | 77.00 | 62.00 |
Interest Expenses | 40.00 | 46.00 |
Tax | 200.00 | 150.00 |
Net Income | 683.00 | 592.00 |
Preferred Stock Dividend | 25.00 | |
Common Stock Dividends | 260.00 | |
Market Value of Equity | 4000.00 | |
Average Number of Shares | 100.00 | |
Share Price | 40.00 | |
Dividends per Share | 2.60 | |
Earnings per Share | 6.58 |