prepares its master budget on a quarterly basis. The following data have been assembled to assist in preparing the master budget for the first quarter: a. As of December 31‚ 2011 (the end of the prior quarter)‚ the company’s general ledger showed the following account balances: DEBIT CREDIT $ $ Cash 48‚000 Accounts receivable 224‚000 Finished goods Inventory (1000 units) 60‚000 Raw Materials inventory (500 units) 10‚000 Buildings and equipment (net) 370‚000 Accounts payable 93‚000 Capital stock 510‚000 Retained earnings
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CONSTRUCTION OF FREE CASH FLOWS A PEDAGOGICAL NOTE. PART I Ignacio Vélez-Pareja ivelez@javeriana.edu.co Department of Management Universidad Javeriana Bogotá‚ Colombia Working Paper N 5 First version: 5-Nov-99 This version: January 2001 This paper can be downloaded from the Social Science Research Network Electronic Paper Collection: http://papers.ssrn.com/paper.taf?abstract_id=196588 CONSTRUCTION OF FREE CASH FLOWS
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Projecting Cash Flow Projecting cash flow is a vital aspect of managing a business. Cash flow covers expenses‚ which is why start-ups often seek financing or loans--to provide a base of capital to fund the business while waiting for cash flow. Here is how to project your cash flow. Estimating the incremental cash flow requires from the investment itself‚ acquiring and disposing of the investment’s assets and the cash flows from the operating the investment. Those affected by the revenues‚ expenditures
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in Tables 4.10 and 4.11 do not show free cash flow and financing requirements. These are calculated in Table 1. Note that free cash flow for 2005 is -$2.3 million. But dividends are $2.0‚ so the company will need 2.3 + 2.0 = $4.3 million in outside equity financing. Table 2 shows that the book value of equity is forecasted to grow from $40.71 million in 2004 to $63.31 million at the end of 2010. Table 3 works out earnings‚ dividends and free cash flow for 2011. By that time Reeby Sports should
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Accounting and Cash Flows: Why is it that the revenue and cost figures shown on a standard income statement may not be representative of the actual cash inflows and outflows that occurred during a period? Financial Statements are prepared according to accrual rule of ‚ according to which cost and revenue are recorded as they occur and not when they are actually received or paid. This is why cash flows during the year may be different from revenue and costs in income statements. Different companies
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established that a strong correlation between estimated future cash flows and the value of a firm exists (Copeland et al‚ 1994 ; Brealey and Myers ‚ 2000; Jones‚ 1998 ). In their study of 51 highly leveraged transactions (HLTs) ‚ Kaplan and Ruback (1995) found that the valuations using the DCF methods are within 10%‚ on average‚ of the market value of the transactions‚ providing a strong relation between the market value and discounted cash flow forecasts. In addition‚ they found that the DCF methods
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Interco’s valuation as a whole. 2) As stated by the equity analysts‚ Interco is an over capitalized company with potential to grow‚ which makes an acquisition easy to finance. 3) Interco is also a cash generative target for a potential acquirer as it generates approximately $0.10 of operating cash flow for every dollar of sales. 4) The company is also structured in a way that it could be broken up and sold into its constituent parts‚ which could prove to be worth more than the whole. 2. As a member
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A balance sheet is a statement businesses produce that outlines their assets and liabilities. It is a snapshot of their fixed assets‚ current assets‚ current liabilities and long term liabilities for a specific moment in time such as the end of a financial year. Using these figures‚ a business is able to calculate their net working capital; how much the business is worth‚ whether it can afford to expand and if it is a good venture for investors. There are different groups of people who are interested
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and Indirect Cash Flows XACC/291 Shontell Chrisman October 30‚ 2013 Direct and Indirect Cash Flows The direct and indirect presentations of cash flows both reach the same conclusions‚ however‚ the way that the conclusions are reached are different. The direct method reports everything that involves cash‚ and the indirect method reports for items that do not affect cash. A direct statement of cash flow reports a company ’s sources and use of cash. The statement has three sections
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Key pointers to balance sheet and profit and loss statements: A balance sheet represents the financial affairs of the company and is also referred to as “Assets and Liabilities” statement and is always as on a particular date and not for a period. A profit and loss account represents the summary of financial transactions during a particular period and depicts the profit or loss for the period along with income tax paid on the profit and how the profit has been allocated (appropriated).
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