Questions are all stated in the photos 8. [Statement of Cash Flows and Cash Burn or Build] Salza Technology Corporation increased its salesfrom $375,000 in 2015 to $450,000 in 2016 as shown in the firm's income statements presented below.LeAnn Sands, chief executive officer and founder of the firm, expressed concern that the cash accountand the firm's marketable securities declined substantially between 2015 and 2016. Salza's complete bal-ance sheets are also shown. Ms. Sands is seeking your assistance in the preparation of a statement ofcash flows for Salza Technology.A. Prepare a statement of cash flows for 2016 for Salza Technology Corporation.B. Provide a brief description of what happened in terms of cash flows (both inflows and outflows) forSalza between 2015 and 2016.SALZA TECHNOLOGY CORPORATIONANNUAL INCOME STATEMENTS FOR YEAR ENDED DECEMBER 31 (IN $ THOUSANDS)20152016Net sales$375$450Less: Cost of goods soldGross prafitLess: Operating expensesLess: Depreciation-225-270150180-46-46-30Less: InterestIncome before taxes100Less: Income taxesNet income-3070Cash dividends$ 17$ 20 BALANCE SHEETS AT END OF DECEMBER 31 (IN S THOUSANDS)20152016Cash$ 39$ 16Accounts receivable5080Inventories151204240300Total current assetsGrass fixed assets200290Less accumulated-125depreciationNet fixed assets105165Total assets$345$465$ 10$ 45Accounts payableBank loan2027Accrued liabilities1023Total current liabilities6095Long-tem debtCommon stockRetained earningsTatal liabilities and equity1515120235$465185$345C. Use your calculations from Part A for cash flows from operating and investing activities to indicatethe extent to which Salza was building or burning cash in 2016.D. Convert the 2016 annual cash build or cash burn to a monthly rate. If cash flow activities relating tooperations and investing for 2016 continue into 2017, indicate (1) how long it will be before Salzaruns out of cash (if Salza is burning cash) or (2) the expected 2017 year-end cash account balanceif Salza is building cash. Assume no changes in cash flows from financing activities in 2017 for cal-culation purposes.9. [Survival Revenues Breakeven] LeAnn Sands wants to conduct revenue breakeven analyses of SalzaTechnology Corporation for 2016. Income statement information is shown in Problem 8. For 2016, thefirm's cost of goods sold is considered to be variable costs, and operating expenses are considered to befixed cash costs. Depreciation expenses in 2016 also are expected to be fixed costs. Calculate Salza'sEBDAT breakeven in terms of survival revenues for 2016.10. [Survival Revenues Breakeven] LeAnn Sands has reason to believe that 2017 will be a replication of 2016(see Problem 8) except that cost of goods sold is expected to be 65 percent of the estimated $450,000 inrevenues. Other income statement relationships are expected to remain the same in 2017 as they were in2016. Calculate the EBDAT breakeven point for 2017 for Salza in terms of survival revenues.

The cash flow statement is a statement that shows cash flow (inflow or outflow of cash) from…

8. [Statement of Cash Flows and Cash Burn or Build] Salza Technology Corporation increased its sales from $375,000 in 2015 to $450,000 in 2016 as shown in the firm's income statements presented below. LeAnn Sands, chief executive officer and founder of the firm, expressed concern that the cash account and the firm's marketable securities declined substantially between 2015 and 2016. Salza's complete bal- ance sheets are also shown. Ms. Sands is seeking your assistance in the preparation of a statement of cash flows for Salza Technology. A. Prepare a statement of cash flows for 2016 for Salza Technology Corporation. B. Provide a brief description of what happened in terms of cash flows (both inflows and outflows) for Salza between 2015 and 2016. SALZA TECHNOLOGY CORPORATION ANNUAL INCOME STATEMENTS FOR YEAR ENDED DECEMBER 31 (IN $ THOUSANDS) 2015 2016 Net sales Less: Cost of goods sold Gross prafit Less: Operating expenses Less: Depreciation $375 $450 -225 -270 150 180 Less: Interest Income before taxes Less: Income taxes Net income Cash dividends

8. [Statement of Cash Flows and Cash Burn or Build] Salza Technology Corporation increased its sales from $375,000 in 2015 to $450,000 in 2016 as shown in the firm's income statements presented below. LeAnn Sands, chief executive officer and founder of the firm, expressed concern that the cash account and the firm's marketable securities declined substantially between 2015 and 2016. Salza's complete bal- ance sheets are also shown. Ms. Sands is seeking your assistance in the preparation of a statement of cash flows for Salza Technology. A. Prepare a statement of cash flows for 2016 for Salza Technology Corporation. B. Provide a brief description of what happened in terms of cash flows (both inflows and outflows) for Salza between 2015 and 2016. SALZA TECHNOLOGY CORPORATION ANNUAL INCOME STATEMENTS FOR YEAR ENDED DECEMBER 31 (IN $ THOUSANDS) 2015 2016 Net sales Less: Cost of goods sold Gross prafit Less: Operating expenses Less: Depreciation $375 $450 -225 -270 150 180 Less: Interest Income before taxes Less: Income taxes Net income Cash dividends

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter4: Preparing And Using Financial Statements

Section: Chapter Questions

Problem 8EP

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