Cash Flows and Financial Statements at Sunset Boards

CASH FLOWS AND FINANCIAL STATEMENTS AT SUNSET BOARDS Below are the financial statements that you are asked to prepare. 1. The income statement for for each one year will look alike this Income statement 2008 2009 Sales $247,259 $301,392 Cost of goods sold 126,038 159,143 Selling & administrative 24,787 32,352 Depreciation 35,581 40,217 EBIT $60,853 $69,680 Interest 7,735 8,866 EBT $53,118 $60,814 Taxes 10,624 12,163 concluding income $42,494 $48,651 Dividends $21,247 $24,326 Addition to retained earnings 21,247 24,326 . The balance sheet for each year will be Balance sheet as of Dec. 31, 2008 specie $18,187 Accounts payable $32,143 Accounts receivable 12,887 Notes payable 14,651 Inventory 27,119 Current liabilities $46,794 Current assets $58,193 Long-term debt $79,235 Net fixed assets $156,975 Owners equity 89,139 Total assets $215,168 Total liab. equity $215,168 In the first year, equity is not given. Therefore, we must calculate equity as a good deal variable.Since total liabilities equity is equal to total assets, equity can be calculated as Equity = $215,168 46,794 79,235 Equity = $89,139 Balance sheet as of Dec. 31, 2009 exchange $27,478 Accounts payable $36,404 Accounts receivable 16,717 Notes payable 15,997 Inventory 37,216 Current liabilities $52,401 Current assets $81,411 Long-term debt $91,195 Net fixed assets $191,250 Owners equity 129,065 Total assets $272,661 Total liab. & equity $272,661The owners equity for 2009 is the beginning of year owners equity, plus the addition to retained earnings, plus the naked as a jaybird equity, so Equity = $89,139 + 24,326 + 15,600 Equity = $129,065 3. Using the OCF equality OCF = EBIT + Depreciation Taxes The OCF for each year is OCF2008 = $60,853 + 35,581 10,624 OCF2008 = $85,180 OCF2009 = $69,680 + 40,217 12,163 OCF2009 = $97,734 4. To calculate the cash current from assets, we need to find the cap spending and stir in net working working large(p). The capital spending for the year was Capital spending Ending net fixed assets $191,250 Beginning net fixed assets 156,975 + Depreciation 40,217 Net capital spending $74,492 And the change in net working capital was Change in net working capital Ending NWC $29,010 Beginning NWC 11,399 Change in NWC $17,611 So, the cash flow from assets was Cash flow from assets Operating cash flow $97,734 Net capital spending 74,492 Change in NWC 17,611 Cash flow from assets $ 5,631 5. The cash flow to creditors was Cash flow to creditors Interest paid $8,866 Net new borrowing 11,960 Cash flow to creditors $3,094 6. The cash flow to stockholders was Cash flow to stockholders Dividends paid $24,326 Net new equity raised 15,600 Cash flow to stockholders $8,726 Answers to questions 1. The firm had positive earnings in an accounting sense (NI 0) and had positive cash flow from operations. The firm invested $17,611 in new net working capital and $74,492 in new fixed assets. The firm gave $5,631 to its stakeholders. It raised $3,094 from bondholders, and paid $8,726 to stockholders. . The expansion plans may be a low risky. The company does have a positive cash flow, but a large portion of the operating cash flow is already going to capital spending. The company has had to raise capital from creditors and stockholders for its current operations. So, the expansion plans may be too aggressive at this time. On the other hand, companies do need capital to grow. Before investing or loaning the company money, you would want to know where the current capital spending is going, and why the company is spending so oft in this area already.