Question

1. Prepare the statement of cash flows?

Assignment 2 Statement of Retained Earnings 2018 Opening balance of RE 2017 2018 INCOME STATEMENT Add, Net Income Less, Dividend Sales 1696 Cost of goods oold = Closing Bolance of RE 1056 Depreciation 97 Statement of Coch Flows Other Expenseo 361 2018 TotslOperating Costs 1,514 EBIT 182 Op. Balance Interest Expense .1 2 Tax(21%) .3 Net Income Deesting detivitios 36 EBT 146 Net Income Add, Depreciation Less, Increase in AR 31 115 .4 Less, Increase in Inv 5 BALANCE SHEET Add, Increase in AP 6 Assets Add, Incrence in Accruals 7 Cash lavesting detivties 350 271 .8 Short-Term Investments Less, Cash uced to nequire fixed assets 198 223 .9 Accounts Receivables Less, Increase in ST Investments 187 201 20 Einancing detiwties Inventories 79 30 Total CH 814 785 2 Net FA 1,005 1,058 Add, Increase in Notes Payable 3 Total Assets Add, Increase in LT Debt 1,819 1.843 Add, Increase in Common Stock 5 Financed by: 6 Accounts Payable 7 Notes Payable Less, Dividend Poyments Closing Balance 65 74 8 Accruals Free Cash Flows 112 124 Total Current Lisbities 177 198 2018 E0 Long-term debt NOPAT 189 180 Common Stock Oporating Capits 88 85 2 Retained Earnings 3 TotalEquvity CA exclusing ST Investments 1,365 1,380 -- CL exclusind Notes Povable 1,453 1,465 4 Total Liabilities and Equity Net Fixed Agoeto 1.843 1,819 35 Total Operating Capital Less, Increase in Oper. Copital 6 Stock Morket Information 7 Stock Price 50 38 No. of shares 100,00 Free Cash Flow 9 Dividend per share ($) 10 WACC( 1 Tax(21%) 1.00 8% ROIC 21% 12 EVA 13 14 -5 Market Volue of Equity Less,Book Value of Equity Market Value Added (MVA) 9t 17 18

Answer 1

Q.1 Prepare the Statement of Cash Flows :

Response :

Statement of Cash Flow - 2018
Opening Balance of Cash		350
Operating Activities
Net Income	115
Add : Depreciation	97
Less : Increase in AR	-14
Less : Increase in Inventory	-11
Add: Increase in AP	9
Add: Increase in Accrual	12	208
Investing Activities
Less: Cash used to acquire asset	-150
Less: Increase in ST Investment	-25	-175
Financing Activities
Add: Increase in notes payable	0
Less: Decrease in LT debts	-9
Less: Decrease in common stock	-3
less: dividend	-100	-112
Closing Balance of Cash		271

One of the important point here is that in balance sheet asset is disclosed as Net fixed asset and depreciation is not shown seprately, hence addition to fixed asset can be worked out as under :

FY 2018 Closing balance of Fixed Asset + Depreciation of FY18 - FY17 Closing Balance of Fixed Asset

Note : It is assumed that no other response is required for Free Cash flow ROIC, EVA since in the question we have been just asked to prepare the cash flow