Question

please i need answers to Question e & f.

South Sea Baubles has the following (incomplete) balance sheet and income statement BALANCE SHEET AT END OF YEAR (Figures in $ millions) Liabilities and Shareholders 2016 Equity 195 Current liabilities 2015 2016 2015 Assets $ 72 $93 $101 $ Current assets 655 860 910 Net fixed assets 1,010 Long-term debt INCOME STATEMENT, 2016 (Figures in $ millions) $2,005 Revenue Cost of goods sold 1,085 Depreciation Interest expense 405 251 a&b. What is shareholders equity in 2015 and 2016? (Enter your answers in millions.) 2015 2016 Shareholders' equity 284 million 252 million < Prev 4 of 10 BEE Next> e

Answer 1

e)

(S in millions) Income Statement Revenue Less: Cost of goods sold EBITDA Less: Depreciation 2,005 1,085 920 405 ЕBIT 515 Less: Intrerest Expense 251 264 ЕBT Less: Taxes @35% on EBT Net Income 92.40 172 Here, EBITDA Earnings before Interest, Taxes, Depreciation and Amortization EBIT Earnings Before Interest and Taxes EBT Earnings Before Taxes EBT is the taxable income

Taxes paid = 264 * 35% = 92.40 million

f)

We have found out Net Income from above, we can use that to find out cash flow from operations.

(S in millions) Cash flow from Operations Net Income Add Back Non Cash Item 171.60 Depreciation Add Back Cash flow from Financing Activities Interest Expenses Cash flow from Operations 405.00 251.00 827.60

Depreciation is added back to the net income because it is a non-cash item. That means there was no cash outflow in the name of depreciation.

Interest expenses is added back because it belongs to the financing activities. When we find cash flow from "financing activities" we can subtract from there.