Skip to main content

Business Finance CORPORATE FINANCE--CONNECT ACCESS CARD

a. Income Statement: Income statement is one of the three financial statements that every organization prepares periodically. It helps the users of the financial statements in analyzing the profitability of the organization. To compute : Operating cash flow of the company. Net income can be computed as: Particulars $ Sales 246,000 Less: Cost (135,000) Gross Profit 111,000 Less: Other expense amount (7,100) Less: Depreciation expense (19,100) Earnings before interest and taxes (EBIT) 84,800 Less: Interest expense (10,000) Earnings before taxes (EBT) 74,800 Less: Tax expense (18,876) Net income 55,924 Less: Dividends paid (9,800) Addition to retained earnings 46,124 Now, operating cash flow can be computed as: Particulars $ Earnings before interest and taxes (EBIT) 84,800 Add: Depreciation expense 19,100 Less: Tax expense (18,876) Operating cash flow 85,024 b. Income Statement: Income statement is one of the three financial statements that every organization prepares periodically. It helps the users of the financial statements in analyzing the profitability of the organization. To compute : Cash flow to creditors. Given: New debt = $6,800 Interest expense = $10,000 Cash flow to creditors can be computed as: Interest expense − New outstanding debt $10,000 − ($6,800) $10,000 + $6,800 $16,800 c. Income Statement: Income statement is one of the three financial statements that every organization prepares periodically. It helps the users of the financial statements in analyzing the profitability of the organization. To compute : Cash flow to stockholders. Given: Dividend paid = $9,800 New equity issued = $7,900 Now, cash flow to stockholders can be computed as: Dividend paid − New equity issued $9,800 - $7,900 $1,900 d. Income Statement: Income statement is one of the three financial statements that every organization prepares periodically. It helps the users of the financial statements in analyzing the profitability of the organization. To compute : Addition to net working capital. Change in net working capital can be computed as: Operating cash flow − Cash flow from assets − Net capital spending $85,024 - $18,700 - $61,000 $5,324 Working notes: Cash flow from assets can be computed as: Cash flow to creditors + Cash flow to stockholders $16,800 + $1,900 $18,700 Also, capital spending can be computed as: Capital spending = Depreciation expense + Increase in Fixed assets Capital spending = $19,100 + $41,900 Capital spending = $61,000

a. Income Statement: Income statement is one of the three financial statements that every organization prepares periodically. It helps the users of the financial statements in analyzing the profitability of the organization. To compute : Operating cash flow of the company. Net income can be computed as: Particulars $ Sales 246,000 Less: Cost (135,000) Gross Profit 111,000 Less: Other expense amount (7,100) Less: Depreciation expense (19,100) Earnings before interest and taxes (EBIT) 84,800 Less: Interest expense (10,000) Earnings before taxes (EBT) 74,800 Less: Tax expense (18,876) Net income 55,924 Less: Dividends paid (9,800) Addition to retained earnings 46,124 Now, operating cash flow can be computed as: Particulars $ Earnings before interest and taxes (EBIT) 84,800 Add: Depreciation expense 19,100 Less: Tax expense (18,876) Operating cash flow 85,024 b. Income Statement: Income statement is one of the three financial statements that every organization prepares periodically. It helps the users of the financial statements in analyzing the profitability of the organization. To compute : Cash flow to creditors. Given: New debt = $6,800 Interest expense = $10,000 Cash flow to creditors can be computed as: Interest expense − New outstanding debt $10,000 − ($6,800) $10,000 + $6,800 $16,800 c. Income Statement: Income statement is one of the three financial statements that every organization prepares periodically. It helps the users of the financial statements in analyzing the profitability of the organization. To compute : Cash flow to stockholders. Given: Dividend paid = $9,800 New equity issued = $7,900 Now, cash flow to stockholders can be computed as: Dividend paid − New equity issued $9,800 - $7,900 $1,900 d. Income Statement: Income statement is one of the three financial statements that every organization prepares periodically. It helps the users of the financial statements in analyzing the profitability of the organization. To compute : Addition to net working capital. Change in net working capital can be computed as: Operating cash flow − Cash flow from assets − Net capital spending $85,024 - $18,700 - $61,000 $5,324 Working notes: Cash flow from assets can be computed as: Cash flow to creditors + Cash flow to stockholders $16,800 + $1,900 $18,700 Also, capital spending can be computed as: Capital spending = Depreciation expense + Increase in Fixed assets Capital spending = $19,100 + $41,900 Capital spending = $61,000

Solution Summary: The author explains that income statement is one of the three financial statements that every organization prepares periodically.

CORPORATE FINANCE--CONNECT ACCESS CARD

CORPORATE FINANCE--CONNECT ACCESS CARD

12th Edition

ISBN: 9781264331062

Author: Ross

Publisher: MCG CUSTOM

See similar textbooks

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

Blurred answer

Chapter 2, Problem 13QAP

Chapter 2, Problem 15QAP

Students have asked these similar questions

A trip goa ques

What is the benefit of the finance subject? explain.

Ordinary shares of tata.

Chapter 2 Solutions

CORPORATE FINANCE--CONNECT ACCESS CARD

Ch. 2 - Prob. 1CQ Ch. 2 - Prob. 2CQ Ch. 2 - Prob. 3CQ Ch. 2 - Prob. 4CQ Ch. 2 - Prob. 5CQ Ch. 2 - Cash Flow from Assets Why is it not necessarily...Ch. 2 - Operating Cash flow Why is it not necessarily bad...Ch. 2 - Net Working Capital and Capital Spending Could a...Ch. 2 - Cash Flow to Stockholders and Creditors Could a...Ch. 2 - Prob. 10CQ

Ch. 2 - Building a Balance Sheet Alesha, Inc., has current...Ch. 2 - Building an Income Statement Gia, Inc, has sales...Ch. 2 - Market Values and Book Values Klingon Cruisers,...Ch. 2 - Calculating Taxes Terri Simmons is single and had...Ch. 2 - Calculating OCF Sheaves, Inc., has sales of...Ch. 2 - Prob. 6QAP Ch. 2 - Prob. 7QAP Ch. 2 - Prob. 8QAP Ch. 2 - Prob. 9QAP Ch. 2 - Prob. 10QAP Ch. 2 - Cash Flows Ritter Corporations accountants...Ch. 2 - Financial Cash Flows The Stancil Corporation...Ch. 2 - Building an Income Statement During the year, the...Ch. 2 - Prob. 14QAP Ch. 2 - Prob. 15QAP Ch. 2 - Residual Claims Stark: Inc., is obligated to pay...Ch. 2 - Net Income and OCF During 2019, Rainbow Umbrella...Ch. 2 - Prob. 18QAP Ch. 2 - Prob. 19QAP Ch. 2 - Prob. 20QAP Ch. 2 - Prob. 21QAP Ch. 2 - Prob. 22QAP Ch. 2 - Cash Flows You are researching Time Manufacturing...Ch. 2 - Prob. 24QAP Ch. 2 - Prob. 1MC Ch. 2 - Prob. 2MC Ch. 2 - Prob. 3MC

Knowledge Booster

Background pattern image

Similar questions

SEE MORE QUESTIONS

Recommended textbooks for you

Fundamentals Of Financial Management, Concise Edi...
Finance
ISBN:9781337902571
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning

Text book image

Fundamentals Of Financial Management, Concise Edi...

Finance

ISBN:9781337902571

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Cengage Learning

SEE MORE TEXTBOOKS