Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN: 9781285190907
Author: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher: Cengage Learning
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Question
Chapter 3, Problem 24PC
To determine
Match the companies with the clues given in the common-size statement of cash flows.
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see attached 1-3 and 1-5 to answer this
Refer to the financial statements of Mixon Company in Exercises 1–3 and 1–5. Evaluate the effi- ciency and profitability of the company by computing the following: (a) net profit margin, (b) total asset turnover, and (c) return on total assets. Comment on these ratio results.
True or False.
15. Balances of nominal accounts are transferred to the Capital account in the SFP. *
34. Statement of Cash Flows explains the observed difference in the cash balance from the beginning to the end of the period. *
35. The bottom line of the Statement of Cash Flows is equivalent to the cash balance presented on the Statement of Financial Position. *
44. The common-size Statement of Comprehensive Income of Company A and Company B shows net income of 10% and 8%, respectively. Company A is more profitable than Company B. *
28. The capital stock account reports the proceeds from the issuance of the stocks. *
39. Vertical analysis compares the balances of one account over different periods.
If a organization's accounts payable balance decreases during the period, when the indirect method is used:
Multiple Choice
The amount of the decrease is added within the operating activities section of the statement of cash flows.
The amount of the decrease is subtracted within the operating activities section of the statement of cash flows.
The amount of the decrease is added within the investing activities section of the statement of cash flows.
The amount of the decrease is subtracted within the investing activities section of the statement of cash flows.
Chapter 3 Solutions
Financial Reporting, Financial Statement Analysis and Valuation
Ch. 3 - Need for a Statement of Cash Flows. The accrual...Ch. 3 - Articulation of the Statement of Cash Flows with...Ch. 3 - Classification of Interest Expense. Under U.S....Ch. 3 - Prob. 4QECh. 3 - Classification of Changes in Short-Term Financing....Ch. 3 - Classification of Cash Flows Related to...Ch. 3 - Treatment of Non-Cash Exchanges. The acquisition...Ch. 3 - Computing Cash Collections from Customers....Ch. 3 - Computing Cash Payments to Suppliers. Lowes...Ch. 3 - Computing Cash Payments for Income Taxes. Visa...
Ch. 3 - Interpreting the Relation between Net Income and...Ch. 3 - Interpreting the Relation between Net Income and...Ch. 3 - Interpreting Relations among Cash Flows from...Ch. 3 - Interpreting Relations among Cash Flows from...Ch. 3 - Interpreting the Statement of Cash Flows. The...Ch. 3 - Interpreting the Statement of Cash Flows. Texas...Ch. 3 - Interpreting the Statement of Cash Flows. Tesla...Ch. 3 - Interpreting the Statement of Cash Flows. Gap Inc....Ch. 3 - Prob. 19PCCh. 3 - Prob. 20PCCh. 3 - Interpreting the Statement of Cash Flows....Ch. 3 - Extracting Performance Trends from the Statement...Ch. 3 - Interpreting a Direct Method Statement of Cash...Ch. 3 - Prob. 24PCCh. 3 - Preparing a Statement of Cash Flows from Balance...Ch. 3 - Prob. 26PCCh. 3 - Preparing a Statement of Cash Flows from Balance...Ch. 3 - Prob. 1AICCh. 3 - Prob. 1BICCh. 3 - Prob. 1CICCh. 3 - Prob. 1DICCh. 3 - Prob. 1EICCh. 3 - Prob. 1FICCh. 3 - Prob. 1GICCh. 3 - Prob. 1HICCh. 3 - Prob. 2AICCh. 3 - Prob. 2BICCh. 3 - Prob. 2CICCh. 3 - Prob. 2DICCh. 3 - Prob. 2EICCh. 3 - Prob. 2FICCh. 3 - Prob. 3IC
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- Which of the following is true of the statement of cash flows? A It covers a span of time and is dated the same as the income statement. B It shows how the profits or losses of the company were generated. C It indicates when long-term debt will mature. D It reports on the qualitative behavior of the company's performance.arrow_forwardDuring the year, Hepworth Company earned a net income of 61,725. Beginning and ending balances for the year for selected accounts are as follows: There were no financing or investing activities for the year. The above balances reflect all of the adjustments needed to adjust net income to operating cash flows. Required: 1. Prepare a schedule of operating cash flows using the indirect method. 2. Suppose that all the data are used in Requirement 1 except that the ending accounts payable and cash balances are not known. Assume also that you know that the operating cash flow for the year was 20,475. What is the ending balance of accounts payable? 3. CONCEPTUAL CONNECTION Hepworth has an opportunity to buy some equipment that will significantly increase productivity. The equipment costs 25,000. Assuming exactly the same data used for Requirement 1, can Hepworth buy the equipment using this years operating cash flows? If not, what would you suggest be done?arrow_forwardFor the past two years, Monroe Corporation’s statement of cash flows has shown net cash provided by financing activities. Which of the following choices could explain this result? a. Collection of accounts receivable balances. b. Sales of factory equipment. c. Issuance of long-term debt. d. Receipt of cash dividends from investments in other company’s stock.arrow_forward
- The cash flows from (used for) operating activities are reported by the direct method on the statement of cash flows. Determine the following: a. If sales for the current year were $558,800 and accounts receivable decreased by $39,700 during the year, what was the amount of cash received from customers?$fill in the blank 1 b. If income tax expense for the current year was $38,900 and income tax payable decreased by $4,500 during the year, what was the amount of cash paid for income taxes?$fill in the blank 2 c. Briefly explain why the cash received from customers in part (a) is different from sales.Because the customers paid than the amount of sales for the period, cash received from customers sales made on account by $39,700 during the current year.arrow_forwardReview the most recent Nike Annual Report, including its Consolidated Statements of Income, Consolidated Balance Sheets, and Consolidated Statements of Cash Flows, as well as any accompanying notes, for the most recent 2-3 years provided. Identify at least one significant change (increase or decrease) from one year to the next in an income statement line item, balance sheet line item, and statement of cash flows line item. Then identify the causes of the change in each of these line items. Discuss the implications of each of these line item changes, and your assessment of the company based on these changes. Do these changes reflect positively or negatively on the company? What is your overall assessment of the outlook for the company?arrow_forwardFinding operating and free cash flows Consider the balance sheets and selected data from the income statement of Keith Corporation that follow. a. Calculate the firm's net operating profit after taxes (NOPAT) for this year. b. Calculate the firm's operating cash flow (OCF) for the year. c. Calculate the firm's free cash flow (FCF) for the year. d. Interpret, compare and contrast your cash flow estimate in parts (b) and (c). Data table (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Assets Cash Marketable securities Accounts receivable Inventories Total current assets Gross fixed assets Less: Accumulated depreciation Net fixed assets Total assets Liabilities and Stockholders' Equity Accounts payable Notes payable Accruals Keith Corporation Balance Sheets Total current liabilities Long-term debt Total liabilities Common stock Retained earnings Total stockholders' equity Total liabilities and stockholders' equity December 31 Income…arrow_forward
- Finding operating and free cash flows Consider the balance sheets and selected data from the income statement of Keith Corporation that follow a. Calculate the firm's net operating profit after taxes (NOPAT) for this year. b. Calculate the firm's operating cash flow (OCF) for the year. c. Calculate the firm's free cash flow (FCF) for the year. d. Interpret, compare and contrast your cash flow estimate in parts (b) and (c). Data table - (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) a. The net operating profit after taxes is (Round to the nearest dollar.) Keith Corporation Balance Sheets December 31 Assets This year Last year Cash $1,530 $960 Marketable securities 1,840 1,200 Accounts receivable 1,990 1,810 Inventories 2,930 2,770 Total current assets $8,290 $6,740 Gross fixed assets $29,550 $28,130 Less: Accumulated depreciation 15,214 13,100 Net fixed assets $14,336 $15,030 Total assets $22,626 $21,770 Liabilities and Stockholders'…arrow_forwardA review of the statement of financial position of Matvei Company revealed the following changes in the account balances: Required: 1. For each of the above items, indicate whether it produces a cash inflow or a cash outflow. a. Increase in accounts receivable Cash outflow b. Increase in retained earnings c. Decrease in salaries payable d. Increase in common shares e. Decrease in inventory f. Increase in accounts payable g. Decrease in long-term debt h. Increase in property, plant, and equipment 2. Classify each change as a cash flow from operating activities (indirect method), a cash flow from investing activities, or a cash flow from financing activities. a. Increase in accounts receivable b. Increase in retained earnings c. Decrease in salaries payable d. Increase in common shares e. Decrease in inventory f. Increase in accounts payable g. Decrease in long-term debt h. Increase in property, plant, and equipmentarrow_forwardSome transactions that don’t increase or decrease cash must be reported inconjunction with a statement of cash flows. What activity of this type did Targetreport during each of the three years presented? What are two other such activitiesthat some companies might report?arrow_forward
- Prepare the statement of cash flows in good form usingINDIRECT METHOD. Be sure to provide a proper heading for thestatement. Thank you.arrow_forwardQuestions: Exhibits 1, 2, and 3 contain cash-flow statements from three companies. Each cash- flowstatement has three years of data. Examine the contents of these cash-flow statements carefully.Answer the following questions about each of the three cash-flow statements.I. For each of the years on the Statement of Cash Flows:1. What were the firm's major sources of cash? Its major uses of cash?2. Was cash flow from operations1 greater than or less than net income?2 Explain indetail the major reasons for the difference between these two figures.3. Was the firm able to generate enough cash from operations to pay for all of itscapital expenditures? 4. Did the cash flow from operations cover both the capital expenditures and the firm's dividend payments, if any? Alpha Corporation - Consolidated Statement of Cash Flows Year Ended June 30, 1991 June 30, 1990 June 30, 1989 Operating Activities Loss from continuing operations $(377.9) $(623.5) $(320.6) Depreciation $168.4…arrow_forwardComplete each of the columns on the table below, indicating in which section each item would be reported on the statement of cash flows (operating, investing, or financing), the amount that would be reported, and whether the item would create an increase or decrease in cash. For item that affect more than one section of the statement, indicate all affected. Assume the indirect method of reporting cash flows from operating activities. Enter all amounts as positive numbers. The first item has been completed as an example. Item Statement Section (operating, financing, investing) Amount to Report +/- Effect on Cash Depreciation of $15,000 for the period Operating $15,000 Increase Issuance of common stock for $35,000 $ Increase in accounts payable of $7,000 $ Retirement of bonds at face value of $100,000 $ Purchase of long-term investments for $94,500 $ Dividends declared and paid of $8,300 $ Increase in Prepaid Rent of $4,500 $ Decrease in…arrow_forward
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