2013 2014 Cost of goods sold $169,969 214,607 Cash 24,524 26,056 Depreciation 47
ID: 2641703 • Letter: 2
Question
2013
2014
Cost of goods sold
$169,969
214,607
Cash
24,524
26,056
Depreciation
47,980
54,230
Interest expense
10,442
11,954
Selling & administrative expenses
33,425
43,626
Accounts payable
43,344
48,090
Net fixed assets
211,680
264,021
Sales
333,426
406,427
Accounts receivable
17,378
22,542
Notes payable
19,757
21,571
Long-term debt
106,848
119,976
Inventory
36,570
50,185
New equity
0
20,160
QUESTIONS
1.How would you describe Sunset Boards
Explanation / Answer
1)
Income statement for the year 2013 and 2014
Year 2013 Operating cash flow = $57,228 + $47,980 = $ 105,208
Year 2014 Operating cash flow = $ 65,608 + $54,230 = $ 119,838
Net working capital = CA - CL
Net working capital 2013 = $78,472 - $63,101 = $15,371
Net working capital 2014 = $98,783 - $69,661 = $ 29,122
Cash flow from asset 2014 =
OCF - Change in working capital - NCS
= OCF - (NWC2014 - NWC2013) - (NFA2014 + Depreciation2014) - [(NFA2013 + Depreciation2013)]
= $119,838 - ($29,122 - $15,371) - [($211,680+$47,980) - ($264,021 + $54,230)]
= $164,678
= Long term interest expense for 2014
= $11,954
= Dividend for 2014 assuming 50% payout = 0.5 x $65,608
= $32,804
Cash flow for sunset for the year 2013 and 2014
94,664
(32,804)
Based on the Statement of Cash Flows below, Sunset Boards barely had a positive cash flow in the 2014, owing to minimal cash flow from financing activities (+$2,298). Had there not been an additional contribution of $20,160 in capital, the NCF would have been negative .Sunset would have been forced to either seek more leverage, or to increase its retentiuon ratio thereby reducing the dividends.
2) Tad's Expansion plans :
Tad
Particulars 2013 2014 Net sales 333,426 406,427 (-) Cost of goods sold 169,969 214,607 = Gross profit 163,457 191,820 (-) Selling & adm Expense 33,425 43,626 (-) Depreciation 47,980 54,230 = EBIT 82,052 93,964 (-) Interest paid 10,442 11,954 = EBT 71,610 82,010 (-) Income Taxe@20%(assume) 14,322 16,402 Net Income 57,288 65,608Related Questions
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