Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
10th Edition
ISBN: 9781337902571
Author: Eugene F. Brigham, Joel F. Houston
Publisher: Cengage Learning
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Chapter 3, Problem 13P
Summary Introduction
To prepare: Cash flow statement of Company B.
Introduction:
Statement of Cash Flow:
The statement of cash flow is a part of the financial statements that are included in the annual report of a company. It reports the cash generated or used by the business in a specified period.
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Chapter 3 Solutions
Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
Ch. 3 - Prob. 1QCh. 3 - Who are some of the basic users of financial...Ch. 3 - If a typical firm reports 20 million of retained...Ch. 3 - Explain the following statement: Although the...Ch. 3 - Prob. 5QCh. 3 - Prob. 6QCh. 3 - Prob. 7QCh. 3 - Prob. 8QCh. 3 - How are managements actions incorporated in EVA...Ch. 3 - Prob. 10Q
Ch. 3 - Prob. 11QCh. 3 - How does the deductibility of interest and...Ch. 3 - BALANCE SHEET The assets of Dallas Associates...Ch. 3 - INCOME STATEMENT Byron Books Inc. recently...Ch. 3 - Prob. 3PCh. 3 - Prob. 4PCh. 3 - Prob. 5PCh. 3 - MVA Over the years. Masterson Corporations...Ch. 3 - EVA Barton Industries has operating income for the...Ch. 3 - PERSONAL TAXES Susan and Stan Britton are a...Ch. 3 - Prob. 9PCh. 3 - STATEMENT OF STOCKHOLDERS EQUITY Electronics World...Ch. 3 - EVA For 2019, Gourmet Kitchen Products reported 22...Ch. 3 - Prob. 12PCh. 3 - Prob. 13PCh. 3 - Prob. 14PCh. 3 - INCOME STATEMENT Edmonds Industries is forecasting...Ch. 3 - Prob. 16PCh. 3 - Prob. 17PCh. 3 - PERSONAL TAXES Mary Jams is a single individual...Ch. 3 - Prob. 19SPCh. 3 - Prob. 20IC
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- Mary Walker, president of Rusco Company, considers $21,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $16,000 in cash was available at the end of this year. Since the company reported a large net income for the year, and also issued both bonds and common stock, the sharp decline in cash is puzzling to Ms. Walker. Rusco CompanyComparative Balance Sheetat July 31 This Year Last Year Assets Current assets: Cash $ 16,000 $ 34,200 Accounts Receivable 221,400 211,300 Inventory 250,900 196,600 Prepaid expenses 7,700 16,200 Total current assets 496,000 458,300 Long-term investments 93,000 125,000 Plant and equipment 862,000 751,000 Less accumulated depreciation 210,500 190,300 Net plant and equipment 651,500 560,700 Total assets $ 1,240,500 $ 1,144,000 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 231,100 $ 175,200 Accrued liabilities 8,100…arrow_forwardLucas Hunter, president of Simmons Industries Inc., believes that reporting operating cash flow per share on the income statement would be a useful addition to the companys just completed financial statements. The following discussion took place between Lucas Hunter and Simmons controller, John Jameson, in January, after the close of the fiscal year: Lucas: Ive been reviewing our financial statements for the last year. I am disappointed that our net income per share has dropped by 10% from last year. This wont look good to our shareholders. Is there anything we can do about this? John: What do you mean? The past is the past, and the numbers are in. There isnt much that can be done about it. Our financial statements were prepared according to generally accepted accounting principles, and I dont see much leeway for significant change at this point. Lucas: No, no. Im not suggesting that we cook the books. But look at the cash flow from operating activities on the statement of cash flows. The cash flow from operating activities has increased by 20%. This is very good newsand, I might add, useful information. The higher cash flow from operating activities will give our creditors comfort. John: Well, the cash flow from operating activities is on the statement of cash flows, so I guess users will be able to see the improved cash flow figures there. Lucas: This is true, but somehow I think this information should be given a much higher profile. I dont like this information being buried in the statement of cash flows. You know as well as I do that many users will focus on the income statement. Therefore, I think we ought to include an operating cash flow per share number on the face of the income statementsomeplace under the earnings per share number. In this way, users will get the complete picture of our operating performance. Yes, our earnings per share dropped this year, but our cash flow from operating activities improved! And all the information is in one place where users can see and compare the figures. What do you think? John: Ive never really thought about it like that before. I guess we could put the operating cash flow per share on the income statement, underneath the earnings per share amount. Users would really benefit from this disclosure. Thanks for the ideaIll start working on it. Lucas: Glad to be of service. How would you interpret this situation? Is John behaving in an ethical and professional manner?arrow_forwardSolve this problemarrow_forward
- Prepare and Interpret a Statement of Cash Flows; Free Cash Flow Mary Walker, president of Rusco Company, considers $14,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $8,000 in cash was available at the end of this year. Since the company reported a large net income for the year, and also issued both bonds and common stock, the sharp decline in cash is puzzling to Ms. Walker. The following additional information is available for this year. a. The company declared and paid a cash dividend. b. Equipment was sold during the year for $8,000. The equipment originally cost $20,000 and had accumulated depreciation of $10,000. c. Long-term investments that cost $20,000 were sold during the year for $30,000. d. The company did not retire any bonds payable or repurchase any of its common stock. Required: 1. Using the indirect method, compute the net cash provided by operating activities for this year. 2. Using the data from (1) above,…arrow_forwardThe management of ABC Company felt proud of their accomplishments concerning cash flow for the end of the year because overall cash increased by $1,500,000. In the operating section, the company showed an increase in cash of $250,000 because of net income. However, because of increases in accounts receivable and inventory, the overall cash outflow from operating activities was $100,000. In the investing section, purchases of long-term assets outweighed the sale of long-term assets which resulted in a cash outflow from investing activities of $500,000. The company has a line-of-credit with the bank. During the year, the company drew on the line which resulted in cash inflow from financing activities of $2,100,000. The cash inflow from financing activities of $2,100,000 less the cash outflow from operating activities of $100,000 and less the cash out flow from investing activities resulted in the overall cash increase of $1,500,000. Analyze the cash flows of ABC Company. What conclusions…arrow_forwardMary Walker, president of Rusco Company, considers $22,000 to be the minimum cash balance for operating purposes. As can be seen from the following statements, only $17,000 in cash was available at the end of this year. Since the company reported a large net income for the year, and also issued both bonds and common stock, the sharp decline in cash is puzzling to Ms. Walker. Assets Current assets: Cash Accounts receivable Inventory Prepaid expenses Total current assets Long-term investments Plant and equipment Less accumulated depreciation Net plant and equipment Total assets Liabilities and Stockholders' Equity Current liabilities: Accounts payable Accrued liabilities Rusco Company Comparative Balance Sheet at July 31 Income taxes payable Total current liabilities Bonds payable Total liabilities. Stockholders' equity: Common stock Retained earnings Total stockholders' equity Total liabilities and stockholders' equity Rusco Company Income Statement For This Year Ended July 31 Sales…arrow_forward
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