Question

Question 12

Below are financial statements for a firm that paid a net $16 million to shareholders in 2010. Supply the missing numbers (indicated by the capital letters) in the financial statements. Make sure to show how you got to the numbers.

Balance sheet, end of 2010

Balance Sheet, End of 2010 (In Million Dollars)
	2010	2009			2010	2009
Operating Assets	A	400		Operating Liabilities	200	150
Financial Assets	300	B		Financial Obligations	F	E
				Shareholders’ Equity	D	180
Total	900	C		Total	G	830
Income Statement, 2010
Operating income after tax		H
Net Financial expense, after tax		4
Comprehensive income		36

B. Calculate free cash flow for 2010

C. Calculate the cash flow with respect to net financial obligations

D. Calculate return on common equity ROCE and return of net operating assets RNOA

     for 2010 on beginning of year denominators.

E. Show that ROCE and RNOA reconcile according to the financing leverage equation.

Answer 1

Missing figures

Basic formula:- Asset = Liabilities + Capital

A = 900 - 300 = 600

C = 830 (should be equal to the liabilities of 2009)

B = 830 - 400 = 430

E = 830 - 180 - 150 = 500

G = 900

Share holder's equity will be reduced by 16 million as company paid dividends to share holders in 2010.

Share holder's equity on 2009 = 180 Million

Share holder's equity on 2010 (D) = 180 - 16 = 164

F = 900 - 164 - 200 = 536