1. Evaluates the financial statements of the company. 2. Calculate the net opera
ID: 2711871 • Letter: 1
Question
1. Evaluates the financial statements of the company.
2. Calculate the net operating profit after taxes.
3. Calculate the operating cash flow. It indicates that means for the company the result.
4. Calculate the free cash flow. It indicates that means for the company the result.
Consider the following information of the status of the company Rio Enterprises. In addition, selected information from the Statement of revenue and expenditure is presented.
December 31
Selected data from the State Revenue and Expenditure:
Assets 2018 2017 Cash $1,500 $1,000 Marketable securities 1,800 1,200 Account Receivable 2,000 1,800 Inventries 2,900 2,800 Total current assets $8,200 $6,800 Gross fixed assets 29,500 28,100 Less: Accumulated depreciation 14,700 13,100 Net fixed assets $14,800 $15,000 Total assets $23,000 $21,800 Liabilities and Stockholder's Equity Accounts payable $1,600 $1,500 Notes Payable 2,800 2,200 Accruals 200 300 Total current liabilities $4,600 $4,000 Long Term debt 5,000 5,000 Total liabilities $9,600 $9,000 Common Stock $10,000 $10,000 Retained Earnings 3,400 2,800 Total Stockholder's Equity $13,400 $12,800 Total Stockholder's Equity and liabilities $23,000 $21,800Explanation / Answer
Net Operating Profit After Taxes = EBIT * (1-Tax) = 2700 * (1-40%) = $1,620
Operating Cash flow = Net income + Interest + taxes + Depreciation + Chage in Working capital
= EBIT * (1-Tax) + Depreciation + Chage in Working capital
= 1620 + (14700 - 13100) + (1800 - 2000) + (2800 - 2900) + (1600 - 1500) + (2800 - 2200) + (200-300)
= 3,520
Free Cash flow = OCF - Capital expenditure
= 3520 - (29500 - 28100) = 2120
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