Free Cash Flow Statement: The free cash ow operating perspective can be viewed a
ID: 2477524 • Letter: F
Question
Free Cash Flow Statement: The free cash ow operating perspective can be viewed as the cash ow into the rm from operations. The free cash ow nancing perspective can be viewed as the cash ow out of the rm creditors and owners. For example, dividends are paid out and income is received (ows in). The cash ows from a nancing perspective must balance with the cash ow from an operating perspective. Using the Blackrock balance sheet and income statements in Table 17, complete the Free Cash Flow Statement for Blackrock in Table 16 for the scal year ending August 31, 2014.
Table 16: BLACKROCK FREE CASH FLOW STATEMENT FREE CASH FLOWS: OPERATING PERSPECTIVE
Operating Income
Plus depreciation expense
Tax expense
Change in income tax payable ___________
After-tax cash ows from operations
Change in net operating working capital
Change in cash
Change in accounts receivable
Change in inventories
Change in accounts payable ___________
Change in net operating working capital
Change in xed assets and land
Purchase of gross plant and equipment ___________
Change in xed assets and land ___________
Free cash ows (operating perspective) ___________
FREE CASH FLOWS: FINANCING PERSPECTIVE
Change in notes payable
Change in long-term debt
Dividends Interest expense
Change in common stock
Change in capital surplus __________
Free cash ows (nancing perspective) ==========
Table 17: BLACKROCK ANNUAL BALANCE SHEET and INCOME STATEMENT
08/31/2014 08/31/2013
ASSETS
Cash & Equivalents $15 $13
Accounts Receivable 647 705
Inventory _2,326___________________ 1,715_
Total Current Assets $2,988 $2,433
Gross Plant, Property &
Equipment 5,384 4,387
Less Accumulated
Depreciation _1,193______________________929_
Net Plant, Property
& Equipment _$4,191____________________$3,458_
TOTAL ASSETS _$7,179===================$5,891_
08/31/2014 08/31/2013
LIABILITIES
Notes Payable $405 $225
Tax Payable 94 95
Accounts Payable _1,506_____________________1,362_
Total Current
Liabilities _$2005_____________________$1,682_
Long Term Debt 22 22
EQUITY
Common Stock 10 72
Paid-In Capital 578 317
Retained Earning _4,564______________________3,798_
Total Equity _$5,152_____________________$4,187_
TOTAL LIABILITIES
& EQUITY _$7,179====================$5,891_
08/31/2014 08/31/2013
INCOME STATEMENT
Sales $24,143 $21,207
Cost of Goods Sold _16,900______________________15,236_
Gross Prot $7,243 $5,971
Operating Expenses 5,070 4,454
Depreciation ____264________________________230_
Operating Prot $1,909 $1,287
Interest Expense _____18__________________________4_
Pretax Income $1,891 $1,282
Total Income Taxes ____794________________________539_
Net Income _$1,097======================$744_
Explanation / Answer
Calculation of net increase/decrease in assets and liabilities compared to last year: 8/31/2014 8/31/2013 Increase/(Decrease) Cash $ 15 $ 13 $ 2 Accounts receivables $ 647 $ 705 $ (58) Inventory $ 2,326 $ 1,715 $ 611 Equipment $ 5,384 $ 4,387 $ 997 Notes payable $ 405 $ 225 $ 180 Tax payable $ 94 $ 95 $ (1) Accounts payable $ 1,506 $ 1,362 $ 144 Long term debt $ 22 $ 22 $ - Equity $ - Common stock $ 10 $ 72 $ (62) Paid in capital $ 578 $ 317 $ 261 Retained earnings $ 4,564 $ 3,798 $ 766 $ 2,840 BlackRock Cash Flow statement Free cash flow from operating perspective Operating income $ 1,097 Plus: Depreciation expense $ 264 Tax expense $ 794 Change in income tax payable $ (1) After tax cash flow from operations $ 2,154 Change in net operating working capital Change in cash $ (2) Change in accounts receivables $ 58 Change in inventories $ (611) change in accounts payable $ 144 Change in net operating working capital $ (411) Change in fixed assets and land Purchase of gross plant and equipment $ (997) Change in fixed assets and land $ (997) Free cash flow from operating activities $ 746 Free cash flow from financing perspective Change in notes payable $ 180 change in long term debt $ - Dividends Interest expense $ 257 Change in common stock $ 62 change in capital surplus $ 261 Dividend paid $ (331) Free cash flow from financing perspective $ 429 Retained earnings for the year ended 31st Aug 2013=$3,798 Net income=$1,097 Retained earnings for the year ended 31st Aug 2014=$4,564 ($3,798+$1,097)-$4,564=$331 Net decrease is due to dividend paid: $331
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