Exercise 11-38 (Algorithmic) Analyzing the Statement of Cash Flows Information for Ditka Inc. and McMahon Company...
Exercise 11-38 (Algorithmic)
Analyzing the Statement of Cash Flows
Information for Ditka Inc. and McMahon Company is given below:
| Ditka Inc | McMahon Company | |
| Cash provided by operating activities | $2,475,000 | $1,639,000 |
| Capital expenditures | 1,157,000 | 748,000 |
| Dividends | 305,000 | 191,000 |
| Average debt maturity over next 5 years | 1,988,000 | 1,212,000 |
1. Compare Ditka's and McMahon's free cash flow and cash flow adequacy ratio. Round ratio to two decimal places.
| Free Cash Flow | Adequacy Ratio | |
| Ditka Inc. | $ | |
| McMahon Company | $ |
2. Conceptual Connection: What information do these cash-based performance measures provide with regard to the two companies?
The input in the box below will not be graded, but may be reviewed and considered by your instructor.
Homework Answers
| 1 | Free Cash flow | = | Operating cash flow- Capital expenditure | ||||||
| Cash flow adequacy ratio | = | Cash flow from operating activities | |||||||
| Capital Expenditure+ Dividend+Debt repayment | |||||||||
| Free Cash flow | Cash flow adequacy ratio | ||||||||
| Ditka Inc | (24,75,000-1157,000) | 24,75,000 | |||||||
| 13,18,000 | 11,57,000+3,05,000+19,88,000 | ||||||||
| 0.72 | |||||||||
| Macmohan | (16,39,000-7,48,000) | 1639000 | |||||||
| 8,91,000 | 748000+191000+1212000 | ||||||||
| 0.76 | |||||||||
| 2 | Free cash flow represents the cash company is able to generate after spending the money required to increase the asset base | ||||||||
| Cash flow adequacy ratio measures if cash flow generated from operating activities are sufficient to pay off the fixed asset purchase , dividend payments & repayement of debt | |||||||||
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Exercise 11-38 (Algorithmic)
Analyzing the Statement of Cash Flows
Information for Ditka Inc. and McMahon Company...
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