Kathy Donnelly Enterprises. reported current assets totaling $65,800 and current liabilities totaling $28,750 at December 31, Year 2The company's income statement and statement of cash flow for Year 2 appear below: Income Statement for Year 2 Sales Cost of goods sold Depreciation expense Other operating expenses Interest expense Income taxes expense Net income Statement of Cash Flow for Year 2 Operating activities Net income Depreciation expense Accounts receivable Inventory Accounts payable Income taxes payable Cash flow from operations Investing activities Marketable securities Equipment Cash flow for investing Financing activities Common stock issued Note payable borrowings Note payable payments Dividends paid Cash flow for financing Net increase in cash Cash, beginning of year Cash, end of year $283,200 105,000 16,400 60,500 6,300 10,700 $84,300 B. Operating cash flow-to-current liabilities ratio C. Cash conversion ratio $ 84,300 16,400 (4,750) 150 (3,050) 1.350 $94,400 $ 1,000 (49.800) (48,800) 9,500 9,950 (8,750) (15,500) (4.800) 40,800 25,150 $65.950 Calculate the following ratios and measures for Kathy Donnelly Enterprises. for Year 2: A. Operating funds ratio D. Earnings before interest, taxes, depreciation and amortization (EBITDA) E. Free cash flow F. Discretionary cash flow What can you conclude about the cash flow health of Kathy Donnelly Enterprises from the ratios and measures?
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
Can you please provide each calculation and formula you use for each part of the question. I would like to know how exactly you arrive at each answer.
INTRODUCTION:
The EBITDA statistic is a form of operating income (EBIT) that removes some non-cash expenditures. The goal of these deductions is to eliminate issues over which business owners have control, such as debt financing, capital structure, depreciation techniques, and taxes (to some extent). It may be used to demonstrate a company's financial performance without regard for its capital structure.
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