ANALYSIS FOR FINANCIAL MANAGEMENT

10TH Edition
Robert C. Higgins
Additional Problems
Chapter 1
1) The following are the Balance Sheet and Income Statement for XYZ Corp.
December 31st
Year 0
Year 1
Current Assets
Cash
Accounts Receivable
Inventories
Total current assets
Noncurrent Assets
Land
Buildings
Equipment
Patent
Accumulated depreciation
Total noncurrent assets
Total Assets
Current Liabilities
Accounts payable to suppliers
Income taxes payable
Total current liabilities
Noncurrent Liabilities
Long term debt
Total liabilities
Shareholders Equity
Common Stock
Retained Earnings
Total shareholders equity
Total Liabilities and Shareholders Equity

$100,000
$95,000
$195,000

$132,000
$85,000
$75,000
$292,000

$30,000
200,000
120,000
10,000
(20,000)
340,000
$535,000

$30,000
310,000
130,000
10,000
(25,000)
455,000
$747,000

$100,000
100,000

$50,000
20,000
70,000

200,000
300,000

250,000
320,000

235,000

327,000
100,000
427,000
$747,000

235,000
$535,000

Income statement for Year 1

Sales revenue
Cost of good Sales
Depreciation expenses
Net interest expenses
Other expenses
Income before taxes
Provision for income taxes
Net income
Dividends paid
Additions to retained earnings

$335,000
(95,000)
(5,000)
(4,000)
(11,000)
220,000
(80,000)
$140,000
40,000
$100,000

a) Looking at the changes in balance sheet accounts, prepare a sources and uses statement for XYZ in
year 1.
b) Prepare a cash flow statement for XYZ in year 1.
2) Use the following information to estimate DTV Corporation's net cash flow from operations as it would
appear on the company's 2010 cash flow statement.

Net sales
Cost of goods sold
Gross income
Depreciation
General, selling expenses
Income before tax
Provision for taxes @ 40%
Income after tax

2009
$300
160
140
30
20
60
36
$54

2010
$400
200
200
40
20
140
66
$84

Cash
Accounts receivable
Inventory

$100
50
60

$50
100
40

Accrued taxes
Accrued wages
Accounts payable

$100
60
30

$120
30
40

3) Below is selected information about UVW Corporations financial statements for 2009 and 2010. All
other company accounts are the same for reporting and tax purposes. Use this information to do the
following:
a) Fill in the blanks in the companys 2010 data.
b) Show that the cash flow from operations in 2010 is the same whether one looks at the reporting
books or the tax books.

2009 Books of Account

Accrued taxes
Gross fixed assets
Accumulated depreciation

Reporting
Purposes
$150
1,000
300

Net sales
Operating costs
Depreciation
Income before tax
Provision for tax @ 34%
Income after tax

Reporting
Purposes
$100
50
10
40
?
$?

Tax
Purposes
$0
1,000
700
2010 Books of Account

Accrued taxes
Gross fixed assets
Accumulated depreciation
Net fixed assets

Taxes due @ 34%

Tax
Purposes
$100
50
30
20
?
$?

?
1,000
?
$?

?
1,000
?
$?

4). a. Is a company better or worse off when the market value of its liabilities falls $10
million? Why?
b. If you owned a company, would you prefer the market value of its assets to rise $10
million or the market value of its liabilities to fall $10 million? Why?