Cash Flows
CHAPTER 2
CASH FLOWS AND FINANCIAL
STATEMENTS AT SUNSET BOARDS
Below are the financial statements that you are asked to prepare.
1. The income statement for each year will look like this:
Income Statement 2008 2009
Sales $190,119 $231,840
Cost of goods sold 96,952 122,418
Selling & administrative 19,067 24,886
Depreciation 27,370 30,936
EBIT $46,730 $53,600
Interest 5,950 6,820
EBT $40,780 $46,780
Taxes (20%) 8,156 9,356
Net income $32,624 $37,424 Dividends $16,312 $18,712
Addition to retained earnings 16,312 18,712
2. The balance sheet for each year will be:
Balance sheet as of Dec. 31, 2008
Cash $13,990 Accounts payable $24,725
Accounts receivable 9,913 Notes payable 11,270
Inventory 20,861 Current liabilities $35,995
Current assets $44,764 Long-term debt $60,950
Net fixed assets $120,750 Owners' equity 68,569
Total assets $165,514 Total liab. & equity $165,514
In the first year, equity is not given. Therefore, we must calculate equity as a plug variable. Since total liabilities & equity is equal to total assets, equity can be calculated as:
Equity = $165,514 – 35,995 – 60,950
Equity = $68,569
Balance sheet as of Dec. 31, 2009
Cash $21,137 Accounts payable $28,003
Accounts receivable 12,859 Notes payable 12,305
Inventory 28,628 Current liabilities $40,308
Current assets $62,624 Long-term debt $70,150
Net fixed assets $147,115 Owners' equity 99,281
Total assets $209,739 Total liab. & equity $209,739
The owner’s equity for 2009 is the beginning of year owner’s equity, plus the addition to retained earnings, plus the new equity, so:
Equity = $68,569 + 18,712 + 12,000
Equity = $99,281
3. Using the OCF equation:
OCF = EBIT + Depreciation – Taxes
The OCF for each year is:
OCF2008 = $46,730 + 27,370 – 8,156
OCF2008 = $65,944
OCF2009 = $53,600 + 30,936 – 9,356
OCF2009 = $75,180
4. To calculate the cash flow from
CASH FLOWS AND FINANCIAL
STATEMENTS AT SUNSET BOARDS
Below are the financial statements that you are asked to prepare.
1. The income statement for each year will look like this:
Income Statement 2008 2009
Sales $190,119 $231,840
Cost of goods sold 96,952 122,418
Selling & administrative 19,067 24,886
Depreciation 27,370 30,936
EBIT $46,730 $53,600
Interest 5,950 6,820
EBT $40,780 $46,780
Taxes (20%) 8,156 9,356
Net income $32,624 $37,424 Dividends $16,312 $18,712
Addition to retained earnings 16,312 18,712
2. The balance sheet for each year will be:
Balance sheet as of Dec. 31, 2008
Cash $13,990 Accounts payable $24,725
Accounts receivable 9,913 Notes payable 11,270
Inventory 20,861 Current liabilities $35,995
Current assets $44,764 Long-term debt $60,950
Net fixed assets $120,750 Owners' equity 68,569
Total assets $165,514 Total liab. & equity $165,514
In the first year, equity is not given. Therefore, we must calculate equity as a plug variable. Since total liabilities & equity is equal to total assets, equity can be calculated as:
Equity = $165,514 – 35,995 – 60,950
Equity = $68,569
Balance sheet as of Dec. 31, 2009
Cash $21,137 Accounts payable $28,003
Accounts receivable 12,859 Notes payable 12,305
Inventory 28,628 Current liabilities $40,308
Current assets $62,624 Long-term debt $70,150
Net fixed assets $147,115 Owners' equity 99,281
Total assets $209,739 Total liab. & equity $209,739
The owner’s equity for 2009 is the beginning of year owner’s equity, plus the addition to retained earnings, plus the new equity, so:
Equity = $68,569 + 18,712 + 12,000
Equity = $99,281
3. Using the OCF equation:
OCF = EBIT + Depreciation – Taxes
The OCF for each year is:
OCF2008 = $46,730 + 27,370 – 8,156
OCF2008 = $65,944
OCF2009 = $53,600 + 30,936 – 9,356
OCF2009 = $75,180
4. To calculate the cash flow from