STATEMENT OF CASH FLOWS

FSA Co. provided the following data:

ASSETS
Cash
Accounts receivable
Merchandise Inventory
Prepaid expenses
Property,
Plant,
and
Equipment
Accumulated Depreciation

TOTAL ASSETS

2016
5,600,000
3,000,000
8,000,000
400,000
55,000,00
0
(20,000,00
0)
52,000,00
0

2015
7,400,000
3,500,000
6,500,000
600,000
42,000,000
(16,000,00
0)
44,000,00
0

LIABILITIES AND SHAREHOLDERS EQUITY

Accounts payable
Accrued expenses
Short-term bank notes
Long-term bank notes
Ordinary share capital
Retained earnings
TOTAL LIABILITIES & SHE

6,000,000
1,500,000
2,000,000
10,000,00
0
30,000,00
0
2,500,000
52,000,0
00

9,500,000
500,000
5,000,000
30,000,000
(1,000,000
)
44,000,00
0

Cash needed to purchase new equipment and to improve the working capital position
was raised by borrowing from bank with a long-term note.
Equipment costing P 2,000,000 and carrying amount of P 1,500,000 was sold for P
1,800,000.
The company paid cash dividends of P 3,000,000 in the current year.
There were no entries in the retained earnings account other than to record dividend
and net income for the current year.
1. What is the net cash provided (used) by operating activities?
2. What is the net cash provided (used) by investing activities?
(13,200,000)
3. What is the net cash provided (used) by financing activities?
The income statement of HAITI COMPANY is presented below:
Sales
Cost of sales
Inventory, 1/1
Purchases
Goods available for sale
Inventory, 12/31

20,700,00
0
5,700,000
13,200,00
0
18,900,00
0
(4,800,00
0)

14,100,00
0

P 7,400,000
P
P 4,000,000

Gross profit
Operating expenses
Selling expenses
Administrative expenses
Net income

6,600,000
1,350,000
2,100,000

(3,450,00
0)
3,150,00
0

Additional information:
Accounts receivable decreased by P 1,080,000 during the year.
Prepaid expenses increased by P 510,000 during the year.
Accounts payable to suppliers of merchandise decreased by P 825,000 during the
year.
Accrued expenses payable decreased by P 300,000 during the year.
Administrative expenses include depreciation expense of P 180,000.
1. What is the total amount of cash received from customers during the year?
P 21,780,000
2. What is the total amount of cash paid to suppliers during the year? P
14,025,000
3. What is the total amount of cash paid for operating expenses during the
year? P 4,080,000
4. What is the net amount of cash provided by operating activities? P
3,675,000
EARNINGS PER SHARE
ARF Co. had 600,000 ordinary shares outstanding on January 1, 2016. Issued 120,000 shares
on May 1, purchased 60,000 treasury shares on September 1, and issued 90,000 shares on
November 1. Also, outstanding during 2016 were 10,000 shares of P 20 par 12% preference
shares. The last dividend payment made to shareholders was in 2013. Net income for 2016
was P 972,000. The tax rate is 30%.
1. Assuming the preference shares are non-cumulative, what amount should
be reported as basic earnings per share?
P 1.44
2. Assuming the preference share are cumulative, what amount should be
reported as basic earnings per share?
P 1.40
FS ANALYSIS
BASIC RATIOS
1. HORIZONTAL ANALYSIS. In 2015, Falcon Corp.s net income was P 800,000 and in
2016, it was P 200,000. What percentage increase in net income must Falcon
achieve in 2017 to offset the 2016 decline in net income?
300%
2. ACTIVITY RATIOS. Lasso Co.s accounts receivable were P 500,000 at December 31,
2015 and P 600,000 at December 31, 2016. Cash sales for 2016 were P 200,000. The
accounts receivable turnover for 2016 was 5.0. What were Lassos total sales for
2016? P 2,950,000
3. SOLVENCY RATIOS. Good Guy Co. has P 800,000 of debt outstanding, and it pays
an interest rate of 10% annually on its bank loan. Good Guys annual sales are P
3,200,000, its tax rate is 40%, and its profit margin on sales is 6%. If the company
does not maintain a times-interest earned (TIE) ratio of at least 4.0x, its bank will
refuse to renew its loan, and bankruptcy will result. What is Good Guys current TIE
ratio? 5.0x

4. PROFITABILITY RATIOS. The average stockholders equity for EO Co. for 2016 was
P 2,000,000. Included in this figure is P 200,000 par value of 8% preferred stock,
which remained unchanged during the year. The return on ordinary shareholders
equity was 12.5% during 2016. How much was the net income of EO in 2016? P
241,000
INTEGRATED RATIOS.
5. The working capital of Rogers Corp. is P 600,000 and its current ratio is 3 is to 1. The
amount of current assets is P 900,000
6. Last year, CIDG Co. had sales of P 200,000,000 and its inventory turnover ratio was
5.0 the companys current assets totaled P 100,000,000 and its current ratio was
1.2:1. What was the companys quick ratio? 0.72:1
7. Beatnik Company has a current ratio of 2.5 and a quick ratio of 2.0. if the firm
experienced P 2,000,000 in sales and sustains an inventory turnover of 8.0, what are
the firms current assets? P 1,250,000
8. An enterprise has total asset turnover of 3.5x and an equity ratio of 30%. If the
enterprise has total debt of P 1,000,000, it has a sales level of P 5,000,000
9. The Intellinet Corporation and Comp Inc. have assets of P 100,000 each and a return
on common equity of 17%. Intellinet has twice the debt of Comp Inc., while Comp has
half the sales of Intellinet. If Intellinet has net income of P 10,000 and a total assets
turnover ratio of 3.5, what is Comp Inc.s profit margin? 7.71%
10.Wanda Inc. has a total assets turnover of 0.3 and a profit margin of 10%. The
president is unhappy with the current return on assets, and he thinks it could be
doubled. This could be accomplished (1) by increasing the profit margin to 15% and
(2) by increasing total assets turnover. What new asset turnover ratio is required to
double the return on assets? 40%
11.A fire has destroyed many of the financial records of R. Son & Co. You are assigned to
put together a financial report. You have found the return on equity to be 12% and
the debt ratio was 40%. What was the return on assets? 7.20%
12.Pietro Inc. sells all its merchandise on credit. It has a profit margin of 4%, days sales
outstanding equal to 60 days, accounts receivable of P 150,000, total assets of P
3,000,000, and a debt ratio of 64%. What is the firms return on equity? Assume a
360-day year. 3.3%
13.Last year, Red Dragon Co. had a profit margin of 10%, total assets turnover of 0.5
and a debt ratio of 20%. This year, the companys CFO wants to double return on
equity (ROE). She expects the total assets turnover will remain at 0.5, while the profit
margin and debt ratio will increase enough to double ROE. Assume that the profit
margin is increased to 15%, what debt ratio will the company need in order to double
its ROE? 40%
14.MM Inc. has P 2,000,000 in current assets, its current ratio is 1.6 and its quick ratio is
1.2. MM plans to raise funds as additional notes payable and to use these funds to
increase inventory. By how much can MMs short-term debt (notes payable) increase
without pushing its quick ratio below 0.8? P 625,000

15.A company has P 1,600,000 of accounts receivable on its balance sheet. The
companys days sales outstanding (DSO) based on 360-day year is 40, its current
assets are P 2,500,000, and its current ratio is 1.5. The company plans to reduce its
DSO from 40 to the industry average of 30 without causing a decline in sales. The
resulting decrease in accounts receivable will free up cash that will be used to reduce
current liabilities. If the company succeeds in its plan, what will the companys new
current ratio be? 1.66
16.EZ Companys bonds have a provision which stipulates that the ratio of senior debt to
total assets will never rise above 45%. The company is at the limit of that ratio and it
wishes to issue still another P 25,000,000 in senior debt. How much additional equity
capital must it raise to comply with this restrictive provision? P 30.56M
17.Crowning Glory Co. has annual sales of P 365,000,000. The companys DSO (based
on a 365-day basis) is 50, which is well above the industry average of 35. The
company has P 200,000,000 in current assets, P 150,000,000 in current liabilities,
and P 75,000,000 in inventories. The companys goal is to reduce its DSO to the
industry average without reducing sales. Cash freed up would be used to repurchase
common stock. What will be the current ratio if the company accomplishes its goal?
1.23
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