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Cash Flow

18. Cash Flow. Candy Canes, Inc., spends $100,000 to buy sugar and peppermint in April. It produces its candy and sells it to distributors in May for $150,000, but it does not receive payment until June. For each month, find the firm`s sales, net income, and net cash flow.

19. Financial Statements. Here are the 1999 and 2000 (incomplete) balance sheets for Nobel Oil Corp.

a. What was owners` equity at the end of 1999 and 2000?

b. If Nobel paid dividends of $100 in 2000, what must have been net income during the year?

c. If Nobel purchased $300 in fixed assets during the year, what must have been the depreciation charge on the income statement?

d. What was the change in net working capital between 1999 and 2000?

e. If Nobel issued $200 of new long-term debt, how much debt must have been paid off during the year?

20. Financial Statements. South Sea Baubles has the following (incomplete) balance sheet and income statement.

a. What is shareholders` equity in 1999 and 2000?

b. What is net working capital in 1999 and 2000?

c. What is taxable income and taxes paid in 2000? Assume the firm pays taxes equal to 35 percent of taxable income.

d. What is cash provided by operations during 2000? Pay attention to changes in net working capital, using Table 2.3 as a guide.

e. Net fixed assets increased from $800 million to $900 million during 2000. What must have been South Sea`s gross investment in fixed assets during 2000?

f. If South Sea reduced its outstanding accounts payable by $35 million during the year, what must have happened to its other current liabilities?

Here are some data on Fincorp, Inc., that you should use for problems 21 Ј28. The balance sheet items correspond to values at year-end of 1999 and 2000, while the income statement items correspond to revenues or expenses during the year ending in either 1999 or 2000. All values are in thousands of dollars.

21. Balance Sheet. Construct a balance sheet for Fincorp for 1999 and 2000. What is shareholders` equity?

22. Working Capital. What happened to net working capital during the year?

23. Income Statement. Construct an income statement for Fincorp for 1999 and 2000. What were retained earnings for 2000? How does that compare with the increase in shareholders` equity between the two years?

24. Earnings per Share. Suppose that Fincorp has 500,000 shares outstanding. What were earnings per share?

25. Taxes. What was the firm`s average tax bracket for each year? Do you have enough information to determine the marginal tax bracket?

26. Balance Sheet. Examine the values for depreciation in 2000 and net fixed assets in 1999 and 2000. What was Fincorp`s gross investment in plant and equipment during 2000?

27. Cash Flows. Construct a statement of cash flows for Fincorp for 2000.

28. Book versus Market Value. Now suppose that the market value (in thousands of dollars) of Fincorp`s fixed assets in 2000 is $6,000, and that the value of its long-term debt is only $2,400. In addition, the consensus among investors is that Fincorp`s past investments in developing

the skills of its employees are worth $2,900. This investment of course does not show up on the balance sheet. What will be the price per share of Fincorp stock?