What is the net operating profit after taxes (NOPAT) for 2020? Enter your answer in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answer to the nearest whole number. $ million What are the amounts of net operating working capital for both years? Enter your answers in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answers to the nearest whole number. 2020: $ million 2019: $ million What are the amounts of total net operating capital for both years? Enter your answers in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answers to the nearest whole number.
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.
Free Cash Flows
Rhodes Corporation’s financial statements are shown below.
Rhodes Corporation: Income Statements for Year Ending December 31
(Millions of Dollars)
| 2020 | 2019 | ||||
| Sales | $ | 13,000 | $ | 11,000 | |
| Operating costs excluding |
11,604 | 9,684 | |||
| Depreciation and amortization | 340 | 320 | |||
| Earnings before interest and taxes | $ | 1,056 | $ | 996 | |
| Less interest | 180 | 100 | |||
| Pre-tax income | $ | 876 | $ | 896 | |
| Taxes (25%) | 219 | 224 | |||
| Net income available to common stockholders | $ | 657 | $ | 672 | |
| Common dividends | $ | 201 | $ | 200 |
Rhodes Corporation:
| 2020 | 2019 | ||||
| Assets | |||||
| Cash | $ | 550 | $ | 500 | |
| Short-term investments | 110 | 100 | |||
| Accounts receivable | 2,750 | 2,500 | |||
| Inventories | 1,450 | 1,300 | |||
| Total current assets | $ | 4,860 | $ | 4,400 | |
| Net plant and equipment | 3,850 | 3,500 | |||
| Total assets | $ | 8,710 | $ | 7,900 | |
| Liabilities and Equity | |||||
| Accounts payable | $ | 1,100 | $ | 1,000 | |
| Accruals | 550 | 500 | |||
| Notes payable | 388 | 200 | |||
| Total current liabilities | $ | 2,038 | $ | 1,700 | |
| Long-term debt | 1,100 | 1,000 | |||
| Total liabilities | $ | 3,138 | 2,700 | ||
| Common stock | 4,416 | 4,500 | |||
| 1,156 | 700 | ||||
| Total common equity | $ | 5,572 | $ | 5,200 | |
| Total liabilities and equity | $ | 8,710 | $ | 7,900 |
Suppose the federal-plus-state tax corporate tax is 25%. Answer the following questions.
- What is the
net operating profit after taxes (NOPAT) for 2020? Enter your answer in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answer to the nearest whole number.$ million
- What are the amounts of net operating working capital for both years? Enter your answers in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answers to the nearest whole number.
2020: $ million
2019: $ million
- What are the amounts of total net operating capital for both years? Enter your answers in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answers to the nearest whole number.
2020: $ million
2019: $ million
- What is the
free cash flow for 2020? Enter your answer in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000.Cash outflow , if any, should be indicated by a minus sign. Round your answer to the nearest whole number.$ million
- What is the
ROIC for 2020? Round your answer to two decimal places.%
- How much of the FCF did Rhodes use for each of the following purposes: after-tax interest, net debt repayments, dividends, net stock repurchases, and net purchases of short-term investments? (Hint: Remember that a net use can be negative.) Enter your answers in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answers to the nearest whole number.
After-tax interest payment $ million Reduction (increase) in debt $ million Payment of dividends $ million Repurchase (Issue) stock $ million Purchase (Sale) of short-term investments $ million
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