Statement of Cash Flows                                    Year Ending 12/31/06                                     Exhibit A                                                (000)                                                    2004                    2005                     2006   net income                              $8,246                    $11,205                $15,255 depreciation expense                6,129                       7,438                    9,383   change in accounts receivable   (2,402)                    (6,619)                 (9,888) change in inventories                 (1,861)                     (4,202)                (8,225) change in accounts payable         898                         1,270                  1,500 change in other                            880                           900                     700     cash flow from operations      11,889                  9,992                       8,725   investing activities capital spending                        (13,219)               (20,522)                (28,835)   financing activities        sale of bonds                       1,830                     13,030                21,610   change in cash                             500                        2,500                 1,500     beginning cash balance              1,900                      2,400                4,900      ending cash balance                    2,400                     4,900                6,400                                                              Income Statement                                                Year Ending 12/31/06                                                         (000)                                                    2004                    2005                  2006   Sales                             $95,000            $119,000       $152,000 Cost of goods sold        57,000             70,210             88,160   Gross profit                   38,000              48,790             63,840   Selling expense             14,810             18,000              22,100 General expense             7,040                8,775             11,340     Operating expenses    21,850             26,775            33,440   Operating income            16,150             22,015          30,400 Interest expense                3,464               4,777          6,931       Pre-tax income                            12,686                 17,238               23,469 Tax expense                                  4,440              6,033                     8,214 Net income                                  8,246             11,205                   15,255                                       Profit Plan- Pessimistic Scenario                                           (000)                                            Exhibit B              Statement of Cash Flows                                                2007                    2008                    2009   net income                        $13,600               $11,500                $10,900 depreciation expense          9,400                      9,400                   9,400   change in accounts receivable  -                       3,000                    3,000 change in inventories                -                       2,000                    1,700 change in accounts payable       -                    (1,500)                    (500) change in other                         -                       (400)                      (100)     cash flow from operations   23,000               24,000                   24,400   investing activities capital spending                 (9,400)                     (9,400)                   (9,400)   financing activities        payment on bonds         (13,500)               (14,500)                (14,900)   change in cash                         9,200                     15,600                12,800 beginning cash balance           9,790                     18,990                34,590 ending cash balance                18,990                   34,590                47,390       _______________________________________________________________________     Other Key Data   Sales                                      $144,400                  137,180             133,751   Operating income                   28,158                     26,064                24,744     QUESTIONS FOR STUDENTS Question Three: list the advantages and disadvantages for the use of ebitda, from the perspective of the entire firm, not just the accounting department.   Question Four: list the advantages and disadvantages for the use of free cash flow, from the perspective of the entire firm, not just the accounting department.   Question Five: if you were Jim Hines what response would you give the president of the firm, who favors the use of pro forma terms?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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                                   Statement of Cash Flows

                                   Year Ending 12/31/06                                     Exhibit A

                                               (000)

                                                   2004                    2005                     2006

 

net income                              $8,246                    $11,205                $15,255

depreciation expense                6,129                       7,438                    9,383

 

change in accounts receivable   (2,402)                    (6,619)                 (9,888)

change in inventories                 (1,861)                     (4,202)                (8,225)

change in accounts payable         898                         1,270                  1,500

change in other                            880                           900                     700

    cash flow from operations      11,889                  9,992                       8,725

 

investing activities

capital spending                        (13,219)               (20,522)                (28,835)

 

financing activities

       sale of bonds                       1,830                     13,030                21,610

 

change in cash                             500                        2,500                 1,500    

beginning cash balance              1,900                      2,400                4,900     

ending cash balance                    2,400                     4,900                6,400     

   

 

                                                  Income Statement

                                               Year Ending 12/31/06

                                                        (000)

                                                   2004                    2005                  2006

 

Sales                             $95,000            $119,000       $152,000

Cost of goods sold        57,000             70,210             88,160  

Gross profit                   38,000              48,790             63,840

 

Selling expense             14,810             18,000              22,100

General expense             7,040                8,775             11,340

    Operating expenses    21,850             26,775            33,440  

Operating income            16,150             22,015          30,400

Interest expense                3,464               4,777          6,931      

Pre-tax income                            12,686                 17,238               23,469

Tax expense                                  4,440              6,033                     8,214

Net income                                  8,246             11,205                   15,255

 

 

                                  Profit Plan- Pessimistic Scenario

                                          (000)                                            Exhibit B             

Statement of Cash Flows

                                               2007                    2008                    2009

 

net income                        $13,600               $11,500                $10,900

depreciation expense          9,400                      9,400                   9,400

 

change in accounts receivable  -                       3,000                    3,000

change in inventories                -                       2,000                    1,700

change in accounts payable       -                    (1,500)                    (500)

change in other                         -                       (400)                      (100)

    cash flow from operations   23,000               24,000                   24,400

 

investing activities

capital spending                 (9,400)                     (9,400)                   (9,400)

 

financing activities

       payment on bonds         (13,500)               (14,500)                (14,900)

 

change in cash                         9,200                     15,600                12,800

beginning cash balance           9,790                     18,990                34,590

ending cash balance                18,990                   34,590                47,390  

   

_______________________________________________________________________

 

 

Other Key Data

 

Sales                                      $144,400                  137,180             133,751

 

Operating income                   28,158                     26,064                24,744

 

 

QUESTIONS FOR STUDENTS

Question Three: list the advantages and disadvantages for the use of ebitda, from the perspective of the entire firm, not just the accounting department.

 

Question Four: list the advantages and disadvantages for the use of free cash flow, from the perspective of the entire firm, not just the accounting department.

 

Question Five: if you were Jim Hines what response would you give the president of the firm, who favors the use of pro forma terms?

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