Given the following balance sheets for Joshua Trucking answer the next five ques

Question

Given the following balance sheets for Joshua Trucking answer the next five questions. Joshua Trucking's net income was $12 million. It paid out $10 million in dividends. All numbers are in millions.
Joshua Trucking
December 31 Balance Sheets
($ in millions)
20X4 20X5
Cash $8 $5
Accounts Receivable 31 31
Inventory 21 30
Total Current Assets
$60 $66
Gross Plant and Equipment $147 $180
Less Depreciation 40 50
Net Plant and Equipment
107 $130
Total Assets $167 $196

Accounts Payable $12 14
Accrued Wages and Taxes 3 2
$15 $16

Long Term Debt 64 80
Common Stock 15 25
Retained Earnings
73 75
Total Liabilities and Equity $167 $196

1. What is Joshua Trucking's cash flow from operations? $14 Million is answer: How did I arrive at $14 Million

2. What is Joshua Trucking's cash flow from investing activities? $33 Million: How did I arrive at $33 Million

3. What is Joshua Trucking's cash flow from financing activities? $16 Million: How did I arrive at $16 Million

4. What is Joshua Trucking's net cash flow? ($3 Million): How did I arrive at -$3 Million

5. What is Joshua Trucking's return on equity? 13.6%: How did I arrive at 13.6%

Explanation / Answer

Cash flow from operations = Net income + Depreciation - Change in accounts receivable - Change in inventory + Change in accounts payable + Change in accrued wages and taxes = 12 + (50 - 40) - (31-31) - (30-21) + (14-12) + (2-3) = $14 Cash flow from investing activities = Change in gross property, plant & equipment = 180 - 147 = $33 Cash flow from financing activities = Change in debt + Change in common equity - Dividends = (80 - 64) + (25 - 15) - 10 = $16 Net cash flow = cash flow from operations - cash flow from investing activities + cash flow from financing activities = 14 - 33 + 16 = -$3 million Return on equity = Net income / beginning period equity Equity includes common stock and retained earnings Average equity = (15 + 73) = $88 Return on equity = 12 / 88 = 13.6%

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