f. Calculate the 2014 price/cash flow ratio. PLEASE EXPLAIN IN DETAILS ! Balance

Question

f. Calculate the 2014 price/cash flow ratio.

PLEASE EXPLAIN IN DETAILS !

Balance Sheets 2012 2013 2014E Assets Cash Short-term investments Accounts receivable Inventories $9,000 48,600 351,200 $ 7,282 20,000 632,160 1,287,360 $1,946,802 1,202,950 $ 14,000 71,632 878,000 Total current assets Gross fixed assets Less: Accumulated depreciation $1,124,000 491,000 146,200 $344,800 $2,680,112 1,220,000 Net fixed assets Total assets Liabilities and Equity Accounts payable Notes payable Accruals $ 836,840 $3,516,952 $ 145,600 200,000 136,000 $ 481,600 323,432 460,000 324,000 720,000 284,960 $1,328,960 1,000,000 460,000 $ 359,800 300,000 380,000 $1,039,800 500,000 1,680,936 Total current liabilities Long-term debt Common stock (100,000 shares) 97,632 557,632 $2,886,592 Retained earnings 203,768 $663,768 $ 1,468,800 Note: "E" denotes "estimated"; the 2014 data are forecasts. 296,216 $1,977,152 3,516,952 Total equity Total liabilities and equity

Explanation / Answer

f. the 2014 price/cash flow ratio:

Price is estimated at $12.17 / share

Cash flow = Net profit + non-cash expenses i.e. amortisation and depreciation expenses

Cash flow of 2014E = 253584 + 120000 =373584 / 250000 = $1.4943 /share

Thus, price/cash flow ratio = $12.17 / $1.4943 = 8.14 (well above the industry average)

Related Questions

Navigate

• Browse (All)
• Browse F
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.