UAL-Questions-Midterm - MFMI 1 of 9 United Airlines [Cash...

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MFMI 1 of 9 United Airlines [Cash Flows, ratios, taxes, leases] 90 minutes 20124 UAL Corporation ("UAL" or the "Company") was incorporated under the laws of the State of Delaware on December 30,1968. The world headquarters of the Company are located at 1200 East Algonquin Road, Elk Grove Township, Illinois 60007. The Company's mailing address is P.O. Box 66919, Chicago, Illinois 60666. The telephone number for the Company is (847) 700-4000. The Company is a holding company and its principal subsidiary is United Air Lines, Inc., a Delaware corporation ("United"), which is wholly-owned. United accounted for virtually all of the Company's revenues and expenses in 1996. United is a major commercial air transportation company. Enclosed are sections of the financial statements of UAL and selected notes to financial statements. Questions 1 Prepare a statement of cash flows of UAL for the Year Ended December 31,1996. You can make the followings assumptions: ) Depreciation on owned operating property and equipment: 420 Amortization of Intangibles 245 ) Proceeds from sale of Operating property and equipment 55 Gain from sale of Operating property and equipment is zero ) On July 12,1994, the shareholders of UAL Corporation ("UAL") approved a plan of recapitalization that provides an approximately 55% equity and voting interest in UAL to certain employees of UnitedAir Lines, Inc. ("United") in exchange for wage concessions and work-rule changes. The employees'equity interest is being allocated to individual employee accounts through the year 2000 underEmployee Stock Ownership Plans ("ESOPs") which were created as part of the recapitalization. Sincethe ESOP shares are being allocated over time, the current ownership interest held by employees issubstantially less than 55%. The entire ESOP voting interest is currently exercisable, which generallywill be voted by the ESOP trustee at the direction of, and on behalf of, the employees participating inthe ESOPs. All the new equity issued in 1996 was given to the employees through the ESOP. UnderGAAP and tax guidelines, the fair value of the equity (including preferred stock) raised for ESOP isconsidered as expense for the period. 2 Compute the following ratios for the year ending December 31, 1996 2a Effective tax rate 2d Return on assets (after tax) 2b Times interest earned 2e Return on Equity 2c Debt to Equity as of December 31, 1996 ) Use the figure given as "Earnings before extraordinary item and cumulative effect of accounting change" for net income. That is ignore the items: "Extraordinary loss on early extinguishment of debt, net of tax " and "Cumulative effect of accounting change, net of tax" Use Note 6 for the following questions.
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This note was uploaded on 03/09/2011 for the course ACTG 516 taught by Professor Staff during the Spring '08 term at Ill. Chicago.

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UAL-Questions-Midterm - MFMI 1 of 9 United Airlines [Cash...

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