Problem_Set__2_Solutions_(Post-Check)_(1)

Problem_Set__2_Solutions_(Post-Check)_(1) - BusM 401...

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BusM 401 Problem Set #2 Evaluating Financial Performance Solutions 1. Do Higgins, Chapter 1, #6. a. Sources and Uses Statement 2005-2008 ($000). Sources of cash: Decrease in cash and securities $259 Increase in accounts payable 2,205 Increase in current portion long-term debt 40 Increase in accrued wages 13 Increase in retained earnings 537 Total $3,054 Uses of cash: Increase in accounts receivable $1,543 Increase in inventories 1,148 Increase in prepaid expenses 4 Increase in net fixed assets 159 Decrease in long-term debt 200 Total $3,054 _________________________________________________________________ _ b. Insights: i. R&E is making extensive use of trade credit to finance a buildup in current assets. The increase in accounts payable equals almost three fourths of total sources of cash. Increasing accounts receivable and inventories account for almost 90 percent of the uses of cash. ii. External financing is a use of cash for R&E, meaning that it is repaying its
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Problem_Set__2_Solutions_(Post-Check)_(1) - BusM 401...

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