1
Cash flow statement It is a statement that shows all the outflows incurred by a company in cash and all the inflows of cash. This statement is divided into three sections or it shows cash flows under three activities namely, investing activities, financing activities and operating activities. To prepare: A cash flow statement by using the indirect method.
2
To calculate:Amount of free cash flow.
3
To calculate:Current ratio and quick (acid-test) ratio for the company.
4
Asset management Asset management means proper management of investments made by a company. Asset management is done to maximize the return from investments.
To calculate:Average collection and average sales period in order to assist the asset management of the company.
5
Debt management Debt management means proper management of the amount that a company owes to others. It specifies the total amount that a company owes to its creditors.
To calculate:Debt to equity ratio and equity multiplier in order to assist the debt management of the company.
6
Profitability ratios These ratios calculate the ability of a company to make a profit related to its total assets, liabilities, expenses and sales made.
To calculate:Net profit margin and return on equity of the company in order to asses its profitability.
7
Assessment of market performance This requires the calculation of overall performance of the company in the market, earnings earned by the company, amount of dividend paid, etc.
To calculate:Earning per share and dividend payout ratio of the company in order to assess its market performance.
Want to see the full answer?
Check out a sample textbook solutionChapter IE Solutions
BREWER ND LL INTRO MGRL ACTG CON+ AC
- In the current year, Harrisburg Corporation had net income of 35,000, a 9,000 decrease in accounts receivable, a 7,000 increase in inventory, an 8,000 increase in salaries payable, a 13,000 decrease in accounts payable, and 10,000 in depreciation expense. Using the indirect method, prepare the operating activities section of its statement of cash flows based on this information.arrow_forwardBrandon, Inc. reported the following items in its balance sheet and income statement:Â Net Income $105,600 Gain on Disposal of Equipment 10,800 Increase in Accounts Receivable 6,200 Decrease in Accounts Payable 14,900 Increase in Common Stock 50,000 Based on this information, what is the cash flow from Operating Activities?arrow_forwardPrepare a Statement of Cash Flows Comparative financial statements for Weaver Company follow: During this year, Weaver sold some equipment for $20 that had cost $40 and on which there was accumulated depreciation of $16. In addition, the company sold long-term investments for $10 that had cost $3 when purchased several years ago. Weaver paid a cash dividend this year and the company repurchased $40 of its own stock. This year Weaver did not retire any bonds. Required: 1. Using the indirect method, determine the net cash provided by operating activities for this year. 2. Using the information in (1) above, along with an analysis of the remaining balance sheet accounts, prepare a statement of cash flows for this year.arrow_forward
- Net Cash Provided by Operating Activities Wiley Company’s income statement for Year 2 follows: The company’s selling and administrative expense for Year 2 includes $7,500 of depreciation expense. Selected balance sheet accounts for Wiley at the end of Years 1 and 2 are as follows: Required: 1. Using the direct method, convert the company’s income statement to a cash basis. 2. Assume that during Year 2 Wiley had a $9,000 gain on sale of investments and a $3,000 loss on the sale of equipment. Explain how these two transactions would affect your computations in (1) above.arrow_forwardBorax Corporation reported net income of $140,000 for the current year. Here are other data regarding Borax's activities during the current year: Interest income from short-term investments Increase in accounts receivable balance Decrease in inventory balance Decrease in accounts payable balance Increase in dividends payable balance Gain on the sale of a warehouse Cash received from the sale of a warehouse Depreciation expense on property. plant and equipment Interest expense on short-term loans $7,400 $42,000 $18,000 $35,000 $29,000 $47,000 $21,000 $32,000 $11,000 Based on the information provided, what is Borax's net cash provided by operating activities? Round to the nearest whole dollar amount and do not enter a dollar sign or a decimal point (e.g., enter 89, not $89.00).arrow_forwardCurwen Inc. reported net cash flows from operating activities of $357,500 on its statement of cash flows for a recent year ended December 31. The following information was reported in the Cash Flows from (used for) Operating Activities section of the statement of cash flows, using the indirect method: Decrease in income taxes payable $7,700 Decrease in inventories 19,140 Depreciation 29,480 Gain on sale of investments 13,200 Increase in accounts payable 5,280 Increase in prepaid expenses 2,970 Increase in accounts receivable 14,300 a. Determine the net income reported by Curwen Inc. for the year ended December 31.$fill in the blank 1 b. Curwen’s net income differed from net cash flows from operations because of the following: Depreciation expense, which has no effect on cash flows from operating activities. Gain on the sale of investments is reported in investing activities section of the cash flow statement. Changes in current operating assets and liabilities that…arrow_forward
- The Sandhill Mills Company has just disclosed the following financial information in its annual report: sales of $1.47 million, cost of goods sold of $815,300, depreciation expenses of $177,800, and interest expenses of $92,200. Assume that the firm has an average tax rate of 29 percent. Compute the cash flows to investors from operating activity. (Round intermediate calculations and final answer to 2 decimal places, e.g. 15.25.) Cash flow from operating activity +Aarrow_forwardILoveFinance, Inc., provided the following financial information for the quarter ending September 30, 2006:  Net income $241,463 Depreciation and amortization $133,414           Increase in receivables $102,709                          Increase in accounts payables $62,411 Decrease in marketable securities $31,225 Increase in inventory $81,336 What is the cash flow from operating activities generated during this quarter by the firm? a. $253,243 b. -$308,458 c. $343,243 d. $374,468arrow_forwardBelow is the income statement data of SwiftTech Inc.: Sales $1,800 decrease in inventory $120 Depreciation $200 Increase in accounts receivable $60 increase in accounts payable $90 After tax profit margin 20% Loss on sale of equipment $40 Based on the above information, what is the Cash flow from operations for SwiftTech Inc.?arrow_forward
- D Ltd has an operating profit of $12m, which includes a depreciation charge of $1m. During the year the trading stock has increased by $4m, trade debtors have increased by $3m and trade creditors have increased by $5m. Prepare a statement of cash flow from operations. Write your answer clearly in the following table given. Cash flows from operating activities $m $m Profit before taxation Adjustment for items not involving a flow of cash Depreciation, amortization, gain or loss on disposal of non- current assets, etc Adjusted profit Increase/decrease in cash due to increase/decrease in current assets Increase/decrease in cash due to working capital changes Cash generated from operationsarrow_forwardDisturbed, Inc., had the following operating results for the past year: sales = $22,616; depreciation = $1,480; interest expense = $1,192; costs = $16,575. The tax rate for the year was 38 percent. What was the company's operating cash flow? $2,089 $3,369 $4,761 $7,321 $3,213arrow_forwardThe following information relates to Elsa Corporation for last year: Net income $64,000 Net decrease in all current assets except cash $7,000 Net increase in current liabilities $16,000 Dividends paid on common stock $10,000 Depreciation expense $8,000 Loss on sale of machinery $5,000 What is Elsa's net cash provided (used) by operating activities for last year on the statement of cash flows? (Assume that current liabilities do not contain any notes payable.) * $68,000 $58,000 $100,000 $54,000arrow_forward
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning