Income taxes paid 23248 net cash provided by

Info icon This preview shows pages 12–14. Sign up to view the full content.

View Full Document Right Arrow Icon
Income taxes paid (23,248) Net cash provided by operating activities 57,175 Payment for purchases of property plant and equipment (86,000) $260,000  200,000 + 26,000 Net cash used for investing activities (86,000)
Image of page 12

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
CASH FLOWS FROM FINANCING Paid to retire bonds (10,000) Step 4c – projection External financing needed 65,305 New balance sheet Dividends paid (18,980) New income statement Net cash used for financing activities 36,325 NET INCREASE (DECREASE) IN CASH 7,500 Cash and equivalents, beginning of year 25,000 Old balance sheet Cash and equivalents, end of year $ 32,500 RECONCILIATION OF NET INCOME TO CASH PROVIDED BY OPERATIONS Net income $ 43,175 New income statement Depreciation 26,000 New income statement A/R (15,000) $65,000 50,000 Inventories (25,500) $110,500 85,000 A/P 18,000 $78,000 60,000 Accrued payables 10,500 $45,400 35,000 Net cash provided by operations $ 57,175 17)(a) Times interest earned: 12,000 = 9.2 times 1,300 Net profit margin: 6,955 = 9.94% 70,000 ROA: 6,955 = 15.1% 46,000 Current ratio: 26,000 = 2.48 10,500 Quick ratio: 20,000 = 1.90 10,500 Debt ratio: 20,000 = 43.5% 46,000 Return on equity: 6,955 = 26.8% 26,000 (b) (1) CL (2) LTL (3) CE Times interest earned 12.0 12.0 12.0 Net profit margin 11.07% 11.07% 11.07% Return on assets 16.9% 16.9% 16.9% EFN Financed by (1) CL (2) LTL (3) CE Current ratio 2.40 2.47 2.47 Quick ratio 1.84 1.89 1.89 Debt ratio 40.7% 40.7% 40.0% Return on equity 28.5% 28.5% 28.2%
Image of page 13
(c) The first three ratios all rise by a lot. The current and quick ratios are not much changed. The debt ratio falls slightly. Return on equity is slightly up. In this case, with the EFN so small, no one financing alternative is appreciably different from the others in its effect on the firm's financial condition. 18)(a) Times interest earned: 55,000 = 2.8 times 20,000 Net profit margin: 22,750 = 4.55% 500,000 ROA: 22,750 = 6.1% 370,000 Current ratio: 170,000 = 1.62 105,000 Quick ratio: 85,000 = 0.8 105,000 Debt ratio: 235,000 = 63.5% 370,000 Return on equity: 22,750 = 16.9% 135,000 (b) (1) CL (2) LTL (3) CE Times interest earned 4.6 4.6 4.6 Net profit margin 6.64% 6.64% 6.64% Return on assets 9.0% 9.0% 9.0% (1) CL (2) LTL (3) CE Current ratio 1.10 1.63 1.63 Quick ratio .54 .81 .81 Debt ratio 66.7% 66.7% 53.0% Return on equity 27.1% 27.1% 19.2% (c) The first three ratios all rise by a lot. The current and quick ratios remain unchanged unless current debt is used for the EFN in which case they fall dramatically. The debt ratio falls significantly if EFN comes from common equity, but rises slightly if debt is used. ROE rises despite financing source: a small amount if EFN comes from equity and a dramatically large amount if EFN comes from debt.
Image of page 14
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern