The Davidson Corporation’s balance sheet and income statement are given here: Davidson Corporation: Balance Sheet as of December 31, 2005 (Millions of Dollars) Assets Liabilities and Equity Cash and equivalents $ 15 Accounts payable $ 120 Accounts receivable 515 Notes payable 220 Inventories 880 Accruals 280 Total current assets $1,410 Total current liabilities $ 620 Net plant and equipment 2,590 Long-term bonds 1,520 Total debt $2,140 Common stock (100 million shares) 260 Retained earnings 1,600 Common equity $1,860 Total assets $4,000 Total liabilities and equity $4,000 Davidson Corporation: Income Statement for Year Ending December 31, 2005 (Millions of Dollars) Sales $6,250 Operating costs excluding depreciation and amortization 5,230 EBITDA $1,020 Depreciation and amortization 220 EBIT $ 800 Interest 180 EBT $ 620 Taxes (40%) 248 Net income $ 372 Common dividends paid $ 146 Earnings per share $ 3.72 a. All revenues were received in cash during the year and all costs except depreciation and amortization were paid in cash during the year. What was net cash flow? How was it different from reported accounting profit? b. Construct the statement of retained earnings for December 31, 2005. c. How much money has been reinvested in the firm over the years? d. At the present time, how large a check could be written without it bouncing? e. How much money must be paid to current creditors within the next year?
Debenture Valuation
A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as the ‘coupon rate.’ Debentures are documented in an indenture, clearly specifying the type of debenture, the rate and method of interest computation, and maturity date.
Note Valuation
It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like:
The Davidson Corporation’s
are given here:
Davidson Corporation: Balance Sheet as of December 31, 2005
(Millions of Dollars)
Assets Liabilities and Equity
Cash and equivalents $ 15 Accounts payable $ 120
Accounts receivable 515 Notes payable 220
Inventories 880 Accruals 280
Total current assets $1,410 Total current liabilities $ 620
Net plant and equipment 2,590 Long-term bonds 1,520
Total debt $2,140
Common stock
(100 million shares) 260
Common equity $1,860
Total assets $4,000 Total liabilities and equity $4,000
Davidson Corporation: Income Statement for Year Ending December 31, 2005
(Millions of Dollars)
Sales $6,250
Operating costs excluding
EBITDA $1,020
Depreciation and amortization 220
EBIT $ 800
Interest 180
EBT $ 620
Taxes (40%) 248
Net income $ 372
Common dividends paid $ 146
Earnings per share $ 3.72
a. All revenues were received in cash during the year and all costs except depreciation
and amortization were paid in cash during the year. What was net cash flow? How
was it different from reported accounting profit?
b. Construct the statement of retained earnings for December 31, 2005.
c. How much money has been reinvested in the firm over the years?
d. At the present time, how large a check could be written without it bouncing?
e. How much money must be paid to current creditors within the next year?
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