Solutions to Problem Set A

2-1A. Belmond, Inc. Balance Sheet ASSETS Current assets Cash Accounts receivable Inventory Total current assets Gross buildings & equipment Accumulated depreciation Net buildings & equipment Total assets

$ 16,550 9,600 6,500 $ 32,650 $122,000 34,000 $ 88,000 $120,650

LIABILITIES AND EQUITY Liabilities Notes payable Accounts payable Total current liabilities Long-term debt Total liabilities Equity Common stock Retained earnings Total equity Total liabilities and equity

$

600 4,800 $ 5,400 55,000 $ 60,400 $ 45,000 15,250 $ 60,250 $120,650

000 $ 350.000 90.050 $ 850 500 $ $ $ $ 1.000 $ 190.000 236. Income Statement Sales Cost of goods sold Gross profits General & admin expense Depreciation expense Total operating expense Operating income (EBIT) Interest expense Earnings before taxes Taxes Net income $ 12.000 100.700 900 4.800 5.360 2-2A.000 464.440 3.350 5.000 20.000 .000 $ 440.000 $ 320.000 160.000 120.000 $ 790.000 $ 790.000 $ 700. Sharp Mfg Company Balance Sheet ASSETS Cash Accounts receivables Inventories Total current assets Machinery and equipment Accumulated depreciation Net fixed assets Total assets $ 96.000 $ 326.750 $ 7.000 110.800 1. Inc.000 LIABILITIES & EQUITY Liabilities Notes payable Accounts payable Total current liabilities Long-term debt Total liabilities Equity Common stock Retained earnings Prior year Current year Total equity Total liabilities and equity $ 100.Belmond.

000 $ 300.000 $ 20.000 500.Sharp Mfg.000 280.000 . Company Income Statement Sales Cost of goods sold Gross profits Operating expense Net income (Assume no taxes) $ 800.

000 $ 60. Pamplin.asset perspective Free cash flows from a financing perspective: Interest received by investors Less change in interest payable Interest received by investors Repayment of long-term debt Increase in short-term debt Repurchase of common stock Common stock dividends Free cash flows .financing perspective: $ 360.000 200.000 $ (50.000 120.000) 60.000 $ 440.000 $ - (50.000) $ (50.000 $ 560. but retained earnings increased only by $100.000) 75.000) 80.000) (25. Free cash flows from an asset perspective: Operating income (EBIT) Depreciation EBITDA Tax expense Less change in tax payable Cash taxes After-tax cash flows from operations Change in net working capital Change in current assets: Change in cash Change in accounts receivable Change in inventory Change in current assets Change in noninterest-bearing current debt: Change in accounts payable Change in net operating working capital Change in long-term assets: Purchase of fixed assets Free cash flows . The remainder was used to decrease .000) 400. thus the balance was distributed in the form of dividends. Inc.2-5A.000.000 $ 120. Net income was $180. Additionally.000. Inc.000 $ (10. Pamplin. had an after-tax operating cash flow of $440.000 $ (10.000. Pamplin acquired further financing though increasing short-term debt by $150. This cash was mainly used to purchase fixed assets of $400.000) Note: The dividends were computed by comparing net income against the change in retained earnings.000 (150.000.000.

payables to suppliers by $50. pay interest of $60. and pay dividends back to the investors of $80.000.000. .000.

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