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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Classifying Transactions
Below are certain events that took place at Hazzard, Inc., last year:
a. Collected cash from customers.
b. Paid cash to repurchase its own stock.
c. Borrowed money from a creditor.
d. Paid suppliers for inventory purchases.
e. Repaid the principal amount of a debt.
f. Paid interest to lenders.
g. Paid a cash dividend to stockholders.
h. Sold common stock.
i. Loaned money to another entity.
j. Paid taxes to the government.
k. Paid wages and salaries to employees.
I. Purchased equipment with cash.
m. Paid bills to insurers and utility providers.
Required:
Prepare an answer sheet with the following headings:
Enter the cash inflows and outflows above on your answer sheet and indicate how each of them would be classified on a statement of cash flows. Place an X in the Operating. Investing, or Financing column as appropriate.
Miracle Tool, Inc., sells a single product (a combination screwdriver, pliers, hammer, and crescentwrench) exclusively through television advertising. The comparative income statements and balance sheets are for the past two years.Additional InformationThe following information regarding the company’s operations in 2011 is available from the company’s accounting records:1. Early in the year the company declared and paid a $4,000 cash dividend.2. During the year marketable securities costing $15,000 were sold for $14,000 cash, resulting in a $1,000 nonoperating loss.3. The company purchased plant assets for $20,000, paying $2,000 in cash and issuing a note payable for the $18,000 balance.4. During the year the company repaid a $10,000 note payable, but incurred an additional $18,000 in long-term debt as described in 3.5. The owners invested $15,000 cash in the business as a condition of the new loans described in paragraph 4.
requried: Prepare and Analyze a Statement of Cash Flows;…
Upton Computers makes bulk purchases of small computers, stocks them in conveniently located warehouses, ships them to its chain of retail stores, and has a staff to advise customers and help them set up their new computers. Upton’s balance sheet as of December 31, 2019, is shown here (millions of dollars):
Sales for 2019 were $350 million, and net income for the year was $10.5 million, so the firm’s profit margin was 3.0%. Upton paid dividends of $4.2 million to common stockholders, so its payout ratio was 40%. Its tax rate was 25%, and it operated at full capacity. Assume that all assets/sales ratios, (spontaneous liabilities)/sales ratios, the profit margin, and the payout ratio remain constant in 2020.a. If sales are projected to increase by $70 million, or 20%, during 2020, use the AFN equation to determine Upton’s projected external capital requirements.b. Using the AFN equation, determine Upton’s self-supporting growth rate. That is, what is the maximum growth rate the firm can…
Chapter 4 Solutions
Financial Reporting, Financial Statement Analysis and Valuation
Ch. 4 - Common-Size Analysis. Common-size analysis is a...Ch. 4 - Earnings per Share. Firm A reports an increase in...Ch. 4 - Prob. 3QECh. 4 - Profit Margin for ROA versus ROCE. Describe the...Ch. 4 - Concept and Measurement of Financial Leverage....Ch. 4 - Advantages of Financial Leverage. A company...Ch. 4 - Prob. 7QECh. 4 - Nucor, a steel manufacturer, reported net income...Ch. 4 - Phillips-Van Heusen, an apparel manufacturer,...Ch. 4 - TJX, Inc., an apparel retailer, reported net...
Ch. 4 - Boston Scientific, a medical device manufacturer,...Ch. 4 - Valero Energy, a petroleum company, reported net...Ch. 4 - Exhibit 4.22 presents selected operating data for...Ch. 4 - Microsoft Corporation (Microsoft) and Oracle...Ch. 4 - Prob. 17PCCh. 4 - Prob. 18PCCh. 4 - Texas Instruments (TI) designs and manufactures...Ch. 4 - JCPenney operates a chain of retail department...Ch. 4 - Prob. 21PCCh. 4 - Selected data for General Mills for 2007, 2008,...Ch. 4 - Prob. 23PCCh. 4 - Hasbro is a leading firm in the toy, game, and...Ch. 4 - Fitch sells casual apparel and personal care...Ch. 4 - Prob. 26PCCh. 4 - Starwood Hotels (Starwood) owns and operates many...Ch. 4 - Select data for Avis and Hertz for 2012 follow....Ch. 4 - Integrative Case 1.1 introduced the industry...Ch. 4 - Prob. 1ABICCh. 4 - Prob. 1ACICCh. 4 - Prob. 1BAICCh. 4 - Prob. 1BBICCh. 4 - Walmart and Carrefour follow similar strategies....Ch. 4 - Walmart and Carrefour follow similar strategies....
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- Fitch sells casual apparel and personal care products for men, women, and children through retail stores located primarily in shopping malls. Its fiscal year ends January 31 of each year. Financial statements for Abercrombie Fitch for fiscal years ending January 31, Year 3, Year 4, and Year 5 appear in Exhibit 4.34 (balance sheets), Exhibit 4.35 (income statements), and Exhibit 4.36 (statements of cash flows). These financial statements reflect the capitalization of operating leases in property, plant, and equipment and long-term debt, a topic discussed in Chapter 6. Exhibit 4.37 (page 312) presents financial statement ratios for Abercrombie Fitch for Years 3 and 4. Selected data for Abercrombie Fitch appear here. Exhibit 4.34 REQUIRED a. Calculate the ratios in Exhibit 4.37 for Year 5. The income tax rate is 35%. b. Analyze the changes in ROA for Abercrombie Fitch during the three-year period, suggesting possible reasons for the changes observed. c. Analyze the changes in ROCE for Abercrombie Fitch during the three-year period, suggesting possible reasons for the changes observed. Exhibit 4.35 Exhibit 4.36 Exhibit 4.37arrow_forwardUpton Computers makes bulk purchases of small computers, stocks them in conveniently located warehouses, ships them to its chain of retail stores, and has a staff to advise customers and help them set up their new computers. Uptons balance sheet as of December 31, 2019, is shown here (millions of dollars): Sales for 2019 were 350 million, and net income for the year was 10.5 million, so the firms profit margin was 3.0%. Upton paid dividends of 4.2 million to common stockholders, so its payout ratio was 40%. Its tax rate was 25%, and it operated at full capacity. Assume that all assets/sales ratios, (spontaneous liabilities)/sales ratios, the profit margin, and the payout ratio remain constant in 2020. a. If sales are projected to increase by 70 million, or 20%, during 2020, use the AFN equation to determine Uptons projected external capital requirements. b. Using the AFN equation, determine Uptons self-supporting growth rate. That is, what is the maximum growth rate the firm can achieve without having to employ nonspontaneous external funds? c. Use the forecasted financial statement method to forecast Uptons balance sheet for December 31, 2020. Assume that all additional external capital is raised as a line of credit at the end of the year. (Because the debt is added at the end of the year, there will be no additional interest expense due to the new debt.) Assume Uptons profit margin and dividend payout ratio will be the same in 2020 as they were in 2019. What is the amount of the line of credit reported on the 2020 forecasted balance sheets? (Hint: You dont need to forecast the income statements because the line of credit is taken out on the last day of the year and you are given the projected sales, profit margin, and dividend payout ratio; these figures allow you to calculate the 2020 addition to retained earnings for the balance sheet without actually constructing a full income statement.)arrow_forwardLowes Companies Inc., a major competitor of The Home Depot in the home improvement business, operates over 1,700 stores. Lowes recently reported the following balance sheet data (in millions): a. Determine the total stockholders equity at the end of Years 2 and 1. b. Determine the ratio of liabilities to stockholders equity for Year 2 and Year 1. Round to two decimal places. c. What conclusions regarding the risk to the creditors can you draw from (b)? d. Using the balance sheet data for The Home Depot in Exercise 1-26, how does the ratio of liabilities to stockholders equity of Lowes compare to that of The Home Depot?arrow_forward
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