ADM 1300 Study Guide - Final Guide: John Wiley & Sons, Financial Statement, Free Cash Flow
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Use the income statement and balance sheet provided to make recommendation for the amount of dividend (if any). How are retained earnings impacted and what does this mean for the organization?
Compute the Internal Growth Rate and Sustainable Growth Rate using current (2015) financial information and then a second scenario; if we issue a dividend payment of $3 million.
Explain your thought process and rationale for a recommended dividend strategy.
Concept Check: Dividends are distributions of profits to your investors who placed their capital at risk for you. Theoretically every company should eventually provide a dividend distribution to their investors.
CME Iron | Balance Sheet | ||
Assets | |||
Current assets: | 2014 | 2015 | change |
Cash | 500,000 | 600,000 | 100,000 |
Investments | 1,000,000 | 1,025,000 | 25,000 |
Inventories | 110,000,000 | 117,000,000 | 7,000,000 |
Accounts receivable | 11,750,000 | 12,500,000 | 750,000 |
Pre-paid expenses | 2,500,000 | 2,600,000 | 100,000 |
Other | 0 | 0 | - |
Total current assets | 125,750,000 | 133,725,000 | 7,975,000 |
Fixed assets: | 2014 | 2015 | change |
Property and equipment | 165,000,000 | 175,000,000 | 10,000,000 |
Leasehold improvements | 0 | 0 | - |
Equity and other investments | 55,000,000 | 65,000,000 | 10,000,000 |
Less accumulated depreciation | 15,000,000 | 15,500,000 | 500,000 |
Total fixed assets | 235,000,000 | 255,500,000 | 20,500,000 |
Other assets: | 2014 | 2015 | change |
Goodwill | 75,000,000 | 70,000,000 | (5,000,000) |
Total other assets | 75,000,000 | 70,000,000 | (5,000,000) |
Total assets | 435,750,000 | 459,225,000 | 23,475,000 |
Liabilities and owner's equity | |||
Current liabilities: | 2014 | 2015 | change |
Accounts payable | 40,500,000 | 42,400,000 | 1,900,000 |
Accrued wages | 85,000,000 | 90,500,000 | 5,500,000 |
Accrued compensation | 10,000,000 | 10,855,000 | 855,000 |
Income taxes payable | 4,024,000 | 4,697,000 | 673,000 |
current portion of LT debt | 5,500,000 | 10,350,000 | 4,850,000 |
Other | 0 | 0 | - |
Total current liabilities | 145,024,000 | 158,802,000 | 13,778,000 |
Long-term liabilities: | 2014 | 2015 | change |
Long term debt | 125,000,000 | 130,000,000 | 5,000,000 |
Total long-term liabilities | 125,000,000 | 130,000,000 | 5,000,000 |
Owner's equity: | 2014 | 2015 | change |
Common stock | 122,000,000 | 122,000,000 | - |
Preferred stock | 16,725,000 | 16,725,000 | - |
Accumulated retained earnings | 27,001,000 | 31,698,000 | 4,697,000 |
Total owner's equity | 165,726,000 | 170,423,000 | 4,697,000 |
Total liabilities and owner's equity | 435,750,000 | 459,225,000 | 23,475,000 |
Income Statement
ACME Iron
December 2015
Financial Statements in '000s of U.S. Dollars
REVENUE | |
Gross Sales | 250,000 |
Less: Sales Returns & Allowances | 2,500 |
Net Sales | 247,500 |
COST OF GOODS SOLD | |
Beginning Inventory | 7,500 |
Add: Purchases | 4,500 |
Freight-in | - |
Direct Labor | 75,000 |
Indirect Expenses | 15,000 |
Inventory Available | 102,000 |
Less: Ending Inventory | |
Cost of Goods Sold | 102,000 |
Gross Profit (Loss) | 145,500 |
EXPENSES | |
Advertising | 7,500 |
Amortization | - |
Bad Debts | 5,000 |
Depreciation | 500 |
Dues and Subscriptions | - |
Employee Benefit Programs | 18,750 |
Insurance | 2,500 |
Interest | 10,350 |
Legal & Professional Fees | 100 |
Licenses & Fees | - |
Miscellaneous | 10 |
Office Expenses | 100 |
Payroll Taxes | 5,625 |
Postage | 3 |
Rent | - |
Repairs & Maintenance | 5,000 |
Supplies | 2,000 |
Telephone | 120 |
Travel | 1,750 |
Utilities | 50,000 |
Vehicle Expenses | 450 |
Wages | 25,000 |
Total Expenses | 134,758 |
Net Operating Income | 10,742 |
OTHER INCOME | |
Gain (Loss) on Sale of Assets | - |
Interest Income | 1,000 |
Total Other Income | 1,000 |
TAXES | 4,697 |
Net Income (Loss) | 7,045 |
Devin E Corporation | |||
Balance Sheet | |||
As of December 31, | |||
2015 | 2014 | ||
Assets: | |||
Cash & Cash Equivalents | $41,900 | $25,000 | |
Accounts Receivable | 24,000 | 6,250 | |
Inventory | 30,000 | 36,000 | |
CurrentAssets | 95,900 | 67,250 | |
Land | 25,000 | 10,000 | |
Equipment | 42,000 | 38,500 | |
Less: Accumulated Depreciation | (14,000) | (7,000) | |
53,000 | 41,500 | ||
Total Assets | 148,900 | 108,750 | |
Liabilities: | |||
Accounts Payable | 17,500 | 22,500 | |
Accrued Salaries Payable | 5,500 | 8,000 | |
Rent Expense Payable | 2,200 | 1,000 | |
Income Tax Payable | 6,900 | 4,000 | |
Current Liabilities | 32,100 | 35,500 | |
Long-term notes payable | 50,000 | 30,000 | |
Total Liabilities | 82,100 | 65,500 | |
Stockholders Equity: | |||
Common Stock | 42,000 | 30,000 | |
Retained Earnings | 24,800 | 13,250 | |
Total Liabilities & StockholdersEquity | $148,900 | $108,750 | |
Devin E Corporation | |||
Income Statement | |||
For the Year Ended December 31, 2015 | |||
2015 | |||
Revenues | $147,000 | ||
Cost of Goods Sold | 84,000 | ||
Gross Profit | 63,000 | ||
Operating Expenses | |||
Depreciation Expense | 7,000 | ||
Salary Expense | 14,600 | ||
Insurance Expense | 2,500 | ||
Rent Expense | 10,000 | ||
Interest Expense | 4,200 | ||
Total OperatingExpenses | 38,300 | ||
Income from Operations | 24,700 | ||
Income Tax Expense | 6,900 | ||
Net Income | $17,800 | ||
Devin E Corporation (theâCompanyâ) manufactures food processing equipment. Use DevinCorporationâs 2015 and 2014 balance sheets and 2015 incomestatement shown below to prepare a statement of cash flows for2015. Note that the Company paid dividends of $6,250 during2015. |
Please fill in the balance sheet as well as create a statementof cash flow sheet
Devin E Corporation | ||||||||
Balance Sheet | ||||||||
31-Dec | ||||||||
Worksheet for Cash Flow | ||||||||
2015 | 2014 | Change | Cash | Operating | Investing | Financing | ||
Cash and Cash Equivalents | ||||||||
Accounts Receivable | ||||||||
Inventory | ||||||||
Land | ||||||||
Equipment | ||||||||
Accumulated Depreciation | ||||||||
Accounts Payable | ||||||||
Accrued Salaries Payable | ||||||||
Rent Expense Payable | ||||||||
Income Tax Payable | ||||||||
Long-term Note Payable | ||||||||
Common Stock | ||||||||
Retained Earnings | ||||||||
Devin E Corporation | ||
Statement of Cash Flows | ||
For the Year Ended December 31, 2015 | ||