Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN: 9781285190907
Author: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher: Cengage Learning
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Chapter 3, Problem 1FIC
To determine
Calculate the amount of Earnings before Interest, tax
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Consider the balance sheets and selected data from the income statement of Keith Corporation that follow (attached)
a. Calculate the firm's net operating profit after taxes (NOPAT) for the year ended December 31, 2015.
b. Calculate the firm's operating cash flow (OCF) for the year ended December 31, 2015.
c. Calculate the firm's free cash flow (FCF) for the year ended December 31, 2015.
d. Interpret, compare and contrast your cash flow estimate in parts (b) and (c).
Refer to the financial statements and related disclosure notes of The Kroger Company for the fiscal year endingJanuary 30, 2016. You can locate the report online from “investor relations” at www.kroger.com.Notice that Kroger’s net income has increased over the three years reported. To supplement their analysis ofprofitability, many analysts like to look at “free cash flow.” A popular way to measure this metric is “structuralfree cash flow” (or as Warren Buffett calls it, “owner’s earnings”), which is calculated as net income from operations, plus depreciation and amortization, minus capital expenditures.Required:Determine free cash flows for Kroger in each of the three years reported. Compare that amount with net incomeeach year. What pattern do you detect?
(AACSB) AnalysisYou review a company’s statement of cash flows and find that cash inflows from operations are $150,000,net outflows from investing are $80,000, and net inflows from financing are $60,000. Did the company’scash balance increase or decrease for the year? By what amount? What types of activities would you findunder the category investing activities? Under financing activities? If you had access to the company’sincome statement and balance sheet, why would you be interested in reviewing its statement of cash flows?What additional information can you gather from the statement of cash flows?
Chapter 3 Solutions
Financial Reporting, Financial Statement Analysis and Valuation
Ch. 3 - Need for a Statement of Cash Flows. The accrual...Ch. 3 - Articulation of the Statement of Cash Flows with...Ch. 3 - Classification of Interest Expense. Under U.S....Ch. 3 - Prob. 4QECh. 3 - Classification of Changes in Short-Term Financing....Ch. 3 - Classification of Cash Flows Related to...Ch. 3 - Treatment of Non-Cash Exchanges. The acquisition...Ch. 3 - Computing Cash Collections from Customers....Ch. 3 - Computing Cash Payments to Suppliers. Lowes...Ch. 3 - Computing Cash Payments for Income Taxes. Visa...
Ch. 3 - Interpreting the Relation between Net Income and...Ch. 3 - Interpreting the Relation between Net Income and...Ch. 3 - Interpreting Relations among Cash Flows from...Ch. 3 - Interpreting Relations among Cash Flows from...Ch. 3 - Interpreting the Statement of Cash Flows. The...Ch. 3 - Interpreting the Statement of Cash Flows. Texas...Ch. 3 - Interpreting the Statement of Cash Flows. Tesla...Ch. 3 - Interpreting the Statement of Cash Flows. Gap Inc....Ch. 3 - Prob. 19PCCh. 3 - Prob. 20PCCh. 3 - Interpreting the Statement of Cash Flows....Ch. 3 - Extracting Performance Trends from the Statement...Ch. 3 - Interpreting a Direct Method Statement of Cash...Ch. 3 - Prob. 24PCCh. 3 - Preparing a Statement of Cash Flows from Balance...Ch. 3 - Prob. 26PCCh. 3 - Preparing a Statement of Cash Flows from Balance...Ch. 3 - Prob. 1AICCh. 3 - Prob. 1BICCh. 3 - Prob. 1CICCh. 3 - Prob. 1DICCh. 3 - Prob. 1EICCh. 3 - Prob. 1FICCh. 3 - Prob. 1GICCh. 3 - Prob. 1HICCh. 3 - Prob. 2AICCh. 3 - Prob. 2BICCh. 3 - Prob. 2CICCh. 3 - Prob. 2DICCh. 3 - Prob. 2EICCh. 3 - Prob. 2FICCh. 3 - Prob. 3IC
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- The following shows excerpts from financial information relating to Aspen Company and Bergamot Company. Compute the following for both companies. Compare your results. A. free cash flow B. cash flows to sales ratio C. cash flows to assets ratioarrow_forwardThe following are excerpts from Hamburg Companys statement of cash flows and other financial records. Compute the following for the company: A. free cash flow B. cash flows to sales ratio C. cash flows to assets ratioarrow_forwardThe following shows excerpts from financial information relating to Stanwell Company and Thodes Company. Compute the following for both companies. Compare your results. A. free cash flow B. cash flows to sales ratio C. cash flows to assets ratioarrow_forward
- Refer to Samsung’s 2017 statement of cash flows. List its cash flows from operating activities, investing activities, and financing activities.arrow_forwardcompare Starbucks and Dunkin donuts cash flow from Operating activities with the net income of 2018, 2019, 2020 Starbucks: 2020. 2019 2018 basic EPS $0.79 $2.95 $3.27 diluted EPS 0.79 2.92 3.24 dunkin donuts: 2020 2019 2018 basic EPS $ 2.87 2.92 2.75 diluted EPS. 2.85. 2.89. 2.71 compare and result in facts of EPS for both the companies thank youarrow_forwardThe income statement and additional data of Healthy Living Plus, Inc. follows: Prepare Healthy Living Plus's statement of cash flows for the year ended September 30, 2018, using the indirect method. Include a separate section for non-cash investing and financing activities. Complete the statement one section at a time, beginning with the cash flows from operating activities. (Use a minus sign or parentheses for amounts that result in a decrease in cash. If a box is not used in the statement, leave the box empty; do not select a label or enter a zero.) a. Acquisition of plant assets is $115,000. Of this amount, $101,000 is paid in cash and $14,000 by signing a note payable. b. Cash receipt from sale of land totals $24,000. There was no gain or loss. c. Cash receipts from issuance of common stock total $35,000. d. Payment of note payable is $13,000. e. Payment of dividends is $11,000. f. From the balance sheet:…arrow_forward
- XYZ Corp. is selling furniture. The comparative balance sheet and income statement are summarized below. You are also given the following additional information:(see detail as attachements) Requirement: Prepare the statement of cash flows using the indirect method for the year ended December 31, current year. Prepare the Cash Flow from Operating Activities (CFO) using the direct method. Based on the cash flow statement, write a short paragraph explaining the major sources and uses of cash by XYZ Corp during the current year.arrow_forwardMilo Clothing experienced the following events during Year 1, its first year of operation: Acquired $19,500 cash from the issue of common stock. Purchased inventory for $6,300 cash. Sold inventory costing $3,780 for $6,426 cash. Paid $600 for advertising expense. Record the events in a horizontal statement model. In the Cash Flow column, use OA to designate operating activity, IA for investment activity, FA for financing activity, or NC for net change in cash. If the element is not affected by the event, leave the cell blank. (Not every cell will require entry. Enter any decreases to account balances and cash outflows with a minus sign.)arrow_forwardUpon reviewing Myert Company's statement of cash flows, the following was noted: Cash flows from operating activities $60,000 Cash flows from investing activities (125,000) Cash flows from financing activities 115,000 From this information, the most likely explanation is that this company is a using cash from operations and borrowing to purchase long-term assets. b using cash from operations and selling long-term assets to pay back debt. c using its profits to expand growth. d using cash from investors to provide for operations.arrow_forward
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