Finance FIN 340 Lecture Notes - Lecture 4: Tax Shield, Accounts Payable, Nopat
Get access
Related Documents
Related Questions
Given the financial statements for Jones Corporation and SmithCorporation:
JONES CORPORATION | |||||||
Current Assets | Liabilities | ||||||
Cash | $ | 22,000 | Accounts payable | $ | 127,000 | ||
Accounts receivable | 81,100 | Bonds payable (long term) | 85,600 | ||||
Inventory | 50,000 | ||||||
Long-Term Assets | Stockholders' Equity | ||||||
Gross fixed assets | $ | 526,000 | Common stock | $ | 150,000 | ||
Less: Accumulated depreciation | 150,700 | Paid-in capital | 70,000 | ||||
Net fixed assets* | 375,300 | Retained earnings | 95,800 | ||||
Total assets | $ | 528,400 | Total liabilities and equity | $ | 528,400 | ||
Sales (on credit) | $ | 1,326,000 |
Cost of goods sold | 790,000 | |
Gross profit | $ | 536,000 |
Selling and administrative expenseâ | 304,000 | |
Depreciation expense | 59,800 | |
Operating profit | $ | 172,200 |
Interest expense | 14,500 | |
Earnings before taxes | $ | 157,700 |
Tax expense | 99,600 | |
Net income | $ | 58,100 |
*Use net fixed assets in computing fixed asset turnover.
â Includes $13,500 in lease payments.
SMITH CORPORATION | |||||||
Current Assets | Liabilities | ||||||
Cash | $ | 38,400 | Accounts payable | $ | 83,300 | ||
Marketable securities | 12,700 | Bonds payable (long term) | 217,000 | ||||
Accounts receivable | 74,300 | ||||||
Inventory | 83,700 | ||||||
Long-Term Assets | Stockholders' Equity | ||||||
Gross fixed assets | $ | 504,000 | Common stock | $ | 75,000 | ||
Less: Accumulated depreciation | 255,800 | Paid-in capital | 30,000 | ||||
Net fixed assets* | 248,200 | Retained earnings | 52,000 | ||||
Total assets | $ | 457,300 | Total liabilities and equity | $ | 457,300 | ||
*Use net fixed assets in computing fixed asset turnover.
SMITH CORPORATION | ||
Sales (on credit) | $ | 1,100,000 |
Cost of goods sold | 640,000 | |
Gross profit | $ | 460,000 |
Selling and administrative expenseâ | 272,000 | |
Depreciation expense | 56,500 | |
Operating profit | $ | 131,500 |
Interest expense | 24,300 | |
Earnings before taxes | $ | 107,200 |
Tax expense | 56,500 | |
Net income | $ | 50,700 |
â Includes $13,500 in lease payments.
a. Compute the following ratios. (Use a360-day year. Do not round intermediate calculations. Input yourprofit margin, return on assets, return on equity, and debt tototal assets answers as a percent rounded to 2 decimal places.Round all other answers to 2 decimal places.)
|
1.)Company ABC has sales of $1,650,000, cost of goods sold of$600,000, EBIT of $450,000, interest expense of $70,000, and a taxrate of 27%. If the company paid $57,000 in dividends what is theaddition to retained earnings.
2.)At the beginning of the year, a firm had current assets of$121,306 and current liabilities of $124,509. At the end of theyear, the current assets were $122,418 and the current liabilitieswere $103,718. What is the change in net working capital?
3.)
Use the Income Statement and Balance Sheet below to calculatethe companies free cash flow.
Income Statement | 2017 |
Net Sales | 675 |
Cost of goods sold | 210 |
Depreciation | 50 |
EBIT | 415 |
Interest Paid | 15 |
EBT | 400 |
Taxes (30%) | 120 |
Net Income | 280 |
Dividends | 105 |
Addition to Retained Earnings | 175 |
Assets | 2016 | 2017 | Liabilities and Shareholders equity | 2016 | 2017 |
Current Assets | Current Liabilities | ||||
Cash | 100 | 125 | Accounts Payable | 200 | 250 |
Accounts Receivable | 250 | 350 | Notes Payable | 150 | 225 |
Inventory | 400 | 375 | |||
Total Current Assets | 750 | 850 | Total Current Liabilities | 350 | 475 |
Long term debt | 300 | 250 | |||
Fixed Assets | Stockholders equity | ||||
PPE | 1500 | 1700 | Common stock | 300 | 300 |
Accumulated Depreciation | 400 | 450 | Retained earnings | 900 | 1075 |
Net PPE | 1100 | 1250 | Total Shareholderâs Equity | 1200 | 1375 |
Total Assets | 1850 | 2100 | Total Liabilities & Equity | 1850 | 2100 |
4.)A firm has net working capital of $900. Long-term debt is$4,200, total assets are $8,000, and fixed assets are $4,300. Whatis the amount of the total liabilities?