2022年上海对外贸易学院财管中加财务报表分析课后练习答案cha3cha4word版本

1、上 海 对 外 贸 易 学 院 财 管 中 加 财 务 报 表 分 析 课 后 练 习 答 案 c ha3 c ha4学习 好资料Cha 3 5.La. i Statement of Cash Flows - Indirect Method Cash from operations: Net income 600 $1,080 Add noncash expense: depreciation Add/Subtract changes in working capital: 150 150 Accounts receivable Inventory 200 Accruals 80 Accoun

2、ts payable 120 $1,530 Cash from investing: Capital expenditures 1,150 Cash from financing: Short term borrowing 550 Long-term repayment 398 Dividends 432 $280 Net change in cash $ 100 Worksheet for Indirect Method Cash Flow Statement Net income IncomeBalance Sheet Change Cash Statement $1,080 12/31/

3、00 12/31/01 Effect $1,080 $1,500 $1,650 $150 Depreciation Accounts receivable 600 600 150 Inventory 600 2,000 2,200 200 200 Accruals 800 880 80 80 Accounts payable 1,200 1,320 120 120 Depreciation 600 Net fixed assets 6,500 7,050 550 550 Capital expenditures $1,150 精品资料学习 好资料Note payable 1,080 5,500

4、 6,050 550 550 Short-term borrowing $ 550 2,000 1,602 398 Long-term debt 398 Long-term debt repayment $ 398 Net income 1,080 Retained earnings 500 1,148 648 648 Dividends paid _ $ 432 _ 0 $ 100 The worksheet to create the cash flow statement is presented above. Each balance sheet change other than c

5、ash is accounted for and matched with its corresponding activity. As a last check, the net income and the add-backs of non-cash items are balanced and “ closed ” to their respective accounts PP&E and retained earnings providing the amounts of capital expenditures and dividends. a. ii Statement of Ca

6、sh Flows - Direct Method Cash from Operations: Cash collections Cash payments for merchandise Cash paid for SG&A Cash paid for interest Cash paid for taxes $9,850 6,080 920 600 720 $1,530 Cash for Investing Activities: Capital expenditures 1,150 Cash for Financing Activities: Short-term borrowing 55

7、0 Long-term debt repayment 398 Dividends 432 $ 280 Net Change in Cash $ 100 The worksheet to create the cash flow statement is presented below. Each balance sheet change other than cash is accounted for and matched with its corresponding activity. Furthermore the operating account changes are matche

8、d to their corresponding income statement item. As a last check, the net income is balanced and dividends. “ closed ” to retained earnings providing the amount of 精品资料学习 好资料Note that there is no difference between the indirect and direct methods in the cash flow statement and in the worksheet for ca

9、sh for investing and financing activities, 精品资料学习 好资料Worksheet for Direct Method Cash Flow StatementChange CashIncome Balance Sheet Sales Accounts receivable Cash CollectionsStatement $10,000 12/31/00 12/31/01 Effect $10,000 150 $ 9,850 $ 1,500 $ 1,650 $ 150 COGS Inventory Accounts payable 6,000 2,0

10、00 1,200 2,200 1,320 200 120 6,000 200 120 Cash Paid for Merchandise $6,080 SG&A expense Accruals 1,000 800 880 80 1,000 80 Cash Paid for SG&A $ 920 Interest expense Cash Paid for Interest 600 600 $ 600 Taxes 720 550 720 Cash Paid for Taxes $ 720 Depreciation Net fixed assets 600 6,500 7,050 600 550

11、 Capital Expenditures $1,150 550 Note payable Short-term Borrowing 5,500 6,050 550 $ 550 Long-term debt Long-term Debt Repaid 2,000 1,602 398 398 $ 398 Net income 1,080 648 1,080 Retained earnings Dividends _ _ $ 0 500 1,148 648 $ 432 _ $ 100 精品资料学习 好资料6.La. Exhibit 3P-3 does not provide the changes

12、 in the individual components that make up the changes in working capital. As such, to create the direct method cash flow statement, we must obtain the information directly from the balance sheet. This procedure does not necessarily yield the same cash flow components using the direct method as thos

13、e provided by the company in its indirect method calculations. Differences may arise when1. there are acquisitions/divestments2. there are foreign exchange adjustments3. the firm aggregates or classifies investing accruals together with operating ones.In this case, the differences are minimal as ind

14、icated below. The calculations required for the direct method cash flow statement are presented in Exhibit 3S-1 along with the assumptions used to generate the statementDirect Method Cash Flow Statement Exhibit 3S-1$348,627Indirect Method Exhibit 3P-3DifferenceCash collections Cash for suppliers Cas

15、h expenses246,10094,791$4,398$ 162Interest paid5,303Tax paid2,127 $ 4,560CASH FROM OPERATIONSCASH FROM INVESTMENTS4,2514,089162CASH FROM FINANCING215215CHANGE IN CASH$524$524精品资料学习 好资料Exhibit 3S-1: Direct Method Statement of Cash Flows Income Balance Balance Change Cash EffectStatement Sheet Sheet 2

16、022 12/31/00 6/30/2022 Sales $342,215 91,636 85,224 6,412 $ 342,215 Accounts receivable 6,412 Cash collections $ 348,627 Cost of goods sold 238,799 163,206 158,451 4,755 238,799 Inventories 4,755 Accounts payable 84,734 72,678 12,056 12,056 Cash inputs $246,100 Operating expenses 91,795 1,426 1,843

17、417 91,795 Other current assets 417 Prepaid expenses & other assets 55,566 56,630 1,064 1,064 Accrued expenses* 17,679 16,299 1,380 1,380 Postretirement benefit obligation 2,265 2,130 135 135 Cash expenses 175 0 175 $ 94,791 Interest expense 5,128 5,128 Interest payable* 175 Interest paid $ 5,303 Ta

18、x expense 831 4,116 2,889 1,227 831 Income tax receivable 1,227 Income tax payable 1,130 2,383 1,253 1,253 Deferred income taxes 18,096 18,574 478 478 Tax paid $ 2,127 CASH FLOW FROM OPERATIONS 91,108 90,966 142 4,560 Depreciation expense 4,732 4,732 Fixed assets 142 Investments in joint ventures 9,

19、714 9,591 123 123 Minority interest 971 1,187 216 216 CASH FLOW FROM INVESTMENTS 3,425 3,425 - $ 4,251 Current portion of long-term debt 0 Long-term debt 161,135 165,799 4,664 4,664 Dividends paid* 4,461 Other - change in stockholders equity 12 CASH FLOW FROM FINANCING$215 Net Income check 930 $ 524

20、 Net change in cash * Assumed change in interest payable to conform to interest paid. * From the indirect method b. 1st 6 Months 1996 1997 1998 1999 2022 2022 Totals 精品资料学习 好资料CFO CFI CFF $34,915 $ 5,165 $23,528 $73,597 $18,606 $4,560 $ 76,103 38,007 42,977 46,767 13,500 9,017 4,251 154,519 $3,092 $

21、37,812 $70,295 $60,097 $27,623 $ 309 $78,416 4,230 38,782 70,474 60,473 27,124 215 80,352 As noted in Box 3-2, from 1996 to 2022, the company generated free cash flow CFO less net capital expenditures of $1.5 million, during the first six months the A. M. Castle added another $309 thousand. However,

22、 Box 3-2 also showed that over the five-year period, Castle paid nearly $50 million in dividends and borrowed nearly $130 million to finance its investments and acquisitions. This trend continued in the first six months of 2022 during which the firm borrowed an additional $4.664 million to help pay

23、its dividends and meet capital expenditure needs. Cash generated from operations from 1996 through the end of the first 6 months of 2022 was $76 million but the company spent $154 million to replace productive capacity and for investments and acquisitions. When free cash flows is calculated on this

24、basis i.e. CFO CFI there is a shortfall of $78 million. This shortfall as well as dividend payments were financed by borrowing over the same period. The inability to meet its capital and dividend needs from operations clearly indicated that either the dividend would have to be reduced or the company

25、 would not be able to remain competitive and/or grow as needed. 9.LThe cash flow statement shows a steady deterioration in CFO; albeit CFO remains positive. Income before extraordinary items on the other hand increases steadily at approximately 8%-10% per year. To explain the discrepancy between the

26、 pattern of income and CFO, we first compute the direct method cash flow statement and then compare the cash flow components with their income statement counterparts. The abbreviated cash flow statement under the direct method is presented below: 1992 Years Ended December 31 1993 1994 精品资料学习 好资料Cash

27、 from operating activities: $2,119,563 1,502,414 453,449 $2,420,961 1,742,149 523,474 $ 2,744,159 2,064,815 601,575 Collections from customers Payments for merchandise Payments for SG&A Interest paid Taxes paid 37,883 12,414 33,367 22,989 33,948 8,408 Other plug 13,263 $ 100,140 247 $ 98,735 4,619 $

28、 30,794 Cash for investing activities: Capital expenditures Acquisition of leaseholds 48,878 30,602 $ 85,480 110,534 21,894 $ 132,428 90,009 8,025 $ 98,034 Cash for financing activities: Long-term borrowings 3,276 23,831 19,432 Revolving credit borrowings 70,243 Proceeds from sale of stock, options

29、and 1,995 54,460 1,050 warrants $ 1,281 $ 30,629 $ 51,861 Net change in cash $ 13,379 $ 3,064 $ 15,379 The required calculations for the operating items are presented in Exhibit 3S-2 on page 21. The last item “ other ” is the plug amount used to arrive at the CFO presented in the indirect cash flow

30、statement Exhibit 3P-4. 精品资料学习 好资料Exhibit 3S-2 Worksheet for Operating Items for Direct Method SoCFSales Change in receivables Cash Collections 1992 1993 1994 $ 2,127,684 8,121 $ 2,119,563 2,414,124 6,837 2,420,961 $ 2,748,634 4,475 $ 2,744,159 COGS Change in inventory 1,527,731 28,401 1,742,276 60,

31、893 1,975,332 82,863 Change in accounts payable Payments to Suppliers 53,718 $1,502,414 61,020 $1,742,149 6,620 $2,064,815 SG&A expense Change in prepaid expenses Change in accrued wages Payments for SG&A 458,804 1,317 4,038 $ 453,449 520,685 2,137 652 $ 523,474 605,538 3,358 7,321 $ 601,575 Interes

32、t expense Amortization of debt issuance costs Interest paid 39,934 2,051 $ 37,883 34,904 1,537 $ 33,367 34,948 1,000 $ 33,948 Tax expense 25,507 26,152 27,569 Change in taxes payable Deferred taxes Taxes paid 9,003 4,090 $ 12,414 2,662 501 $ 22,989 17,567 1,594 $ 8,408 精品资料学习 好资料The comparison of th

33、e cash flow and income statement components is presented below: Sales 1992 1993 1994 %change %change %change 1992-93 1993-94 1992-94 2,127,684 2,414,124 2,748,634 13.5% 13.9% 29.2% Cash collections 2,119,563 2,420,961 2,744,159 14.2% 13.3% 29.5% Collections/Sa99.61% 100.28% 99.84% les COGS 1,527,731

34、 1,742,276 1,975,332 14.0% 13.4% 29.3% Payments to suppliers 1,502,414 1,742,149 2,064,815 16.0% 18.5% 37.4% Payments/COGS 98.34% 99.99% 104.53% 13.5% 16.3% 32.0% SG&A expense 458,804 520,685 605,538 Payments for SG&A 453,449 523,474 601,575 15.4% 14.9% 32.7% Payments/SG&A 98.83% 100.54% 99.35% Cred

35、it and collections do not seem to be responsible for the deterioration in CFO. A comparison of cash collections with sales indicates that collections increased at a slightly faster pace than sales. The collections/sales ratio increased from 99.61% in 1992 to 99.84% in 1994. Inventory, however, is an

36、other matter. Payments for inventory increased by 37% whereas COGS increased by only 29%. This is indicative of inventory being bought and paid for but not being sold. The proportion of payments to COGS increased accordingly from 98.3% to 104.5% in two years. This 6% increase translates based on COG

37、S of close to $2,000,000 to an increased annual cash requirement of $120,000. Thus, the first cause of Radlocs problems seems to be inventories. Its income may be overstated as inventory may have to be written down if it cannot be sold. Even if inventory is eventually sold and the purchases now bein

38、g made now are able to satisfy future growth, the firm may still face liquidity problems as it requires cash to purchase and carry the new inventory. However, as CFO is still positive the firm may still be a good candidate for credit. 精品资料学习 好资料Further insights as to the impact of growth can be seen

39、 if we compare free cash flow CFO - CFI with income and CFO. Earnings before extraordinary items 1992 $37,262 100,140 1993 $41,378 98,735 1994 $44,359 30,794 Free Cash Flow 14,660 33,693 67,240 150,000100,00019931994Earnings before50,000extraordinary itemsCFO-Free Cash Flow s199250,000100,000Althoug

40、h income rises, CFO and free cash flow fall. CFO exceeds income in 1992 and 1993 as the noncash depreciation addback increases CFO relative to income. By 1994, however, CFO, although positive falls below income. This indicates that the firm may have problems in covering the replacement of current pr

41、oductive capacity. Free cash flow is negative in 1993 and 1994 and “ barely ” positive in 1992. This indicates that the firms growth in addition to inventory requires cash that Radloc cannot supply internally. Where did the cash come from. In 1993, it met its cash requirements by issuing stock; in 1

42、994 the firms short term debt increased considerably as it drew down its revolving credit lines. Thus, the loan should not be granted as the firm seems to be facing an increasing liquidity crisis. Note: Radloc is an anagram for Caldor, a chain of discount stores. The data in Exhibit 3P-4 were taken

43、from Caldors published financial statements. Caldor filed for Chapter 11 bankruptcy soon after the 1994 statements were published. Cha 4 8.La. Company 1 Industry Chemicals and drugs Monsanto 精品资料学习 好资料b. 2 Aerospace Boeing 3 Computer software Altos Computer 4 Department stores J.C. Penney 5 Consumer

44、 foods Quaker Oats 6 Electric utility SCEcorp 7 Newspaper publishing Knight Ridder 8 Consumer finance Household Finance 9 Airline AMR Corp. The airline, consumer finance, and electric utility industries are service industries. They are characterized by the absence of cost of goods sold and inventori

45、es. Companies 6, 8, and 9 have the lowest ratios COGS/sales and inventories/total assets. Newspaper publishing may also be considered a service industry; we will return to this later. Company 8 is the consumer finance company. It has a high level of debt balanced by a high level of receivables and i

46、nvestments loans and securities. Much of its debt is short-term, reflecting the short maturities of its loans. It has almost no fixed assets. The ratio of interest expense to revenues is the highest for this company. Both the electric utility and airline firms would have high fixed assets; utilities

47、 generally have higher assets lower asset turnover, are more profitable, and have higher debt and interest expense. Airlines, on the other hand, have high current liabilities for trade payables payments to suppliers and for advance ticket sales other current liabilities. We conclude that company 6 i

48、s the electric utility and company 9 is the airline. Companies 1, 2, and 3 have high R&D expense, consistent with the aerospace, chemicals and drugs, and computer software industries. Aerospace would have the highest inventory low inventory turnover. Customer prepayments under long term contracts re

49、sult in lower receivables and large customer advances other current liabilities. Therefore, company 2 is the aerospace firm. 精品资料学习 好资料Distinguishing company 1 from company 3 is difficult. Computer software and drugs are both characterized by high R & D. The inclusion of chemicals, however, should l

50、ower the intensiveness of R&D, suggesting that company 3 is the computer software firm. Computer software, lacking manufacturing, is less capital intensive than chemicals and drugs and the latter is generally more profitable. Further, the chemical industry being older should have older plant greater

51、 proportion depreciated. Company 1 is, therefore, the chemical and drugs firm and company 3 is in the computer software industry. Companies 4, 5, and 7 remain. Company 4 has high inventories and COGS, the highest receivables relative to assets, and high asset turnover, all of which suggest a retaile

52、r. It has no R&D, high advertising expense, and low pretax profit margins. Company 4 is the department store firm. Company 5 has high net property relative to assets, and the highest ratio of advertising to revenues. Company 5 must be the consumer foods company. Company 7 is the newspaper publisher.

53、 It has very low inventory but high cost of goods sold; inventory is primarily newsprint while cost of goods sold includes the high cost of reporting and production. Company 7 has the highest intangibles newspapers purchased and very high pretax profit margins most newspapers have only indirect comp

54、etition. This exercise was intended to show that industries have balance sheet and income statement characteristics that set them apart from others. These characteristics are often used to compare firms within an industry e.g. advertising as a percentage of sales for consumer goods firms. Summarized

55、 data should be used with caution, however. Different firms even in the same industry classify identical items differently. Thus the analyst should examine original financial statements to achieve better comparability. Differences among firms may be due to operational or classification differences.

56、When management is available to answer questions, these differences are often useful starting points for obtaining a better understanding of the firm. 精品资料学习 好资料18.Ma. Income/equity 1997 1998 1999 $2,664/$12,766 $603/$11,833 $1,177/$12,042 = ROE = 20.87% = 5.10% = 9.77% b. Operating margin EBIT/sale

57、s 1997 1998 1999 8.51% 3.64% 5.96% X Interest burden EBT/EBIT 0.86 0.62 0.85 X Tax burden Net income/EBT 0.80 0.86 0.66 X Asset turnover Sales/assets 1.53 1.08 1.21 X Leverage Assets/equity 2.32 2.41 2.41 = ROE 20.78% 5.05% 9.75% Note that, due to rounding errors, the ROEs calculated above are sligh

58、tly lower than ROE calculated directly as net income/ending equity. Operating margin, and asset turnover are the prime factors responsible for the changes in ROE. The interest burden contributed somewhat to the drop in ROE in 1998. Leverage assets/equity and the tax burden are relatively constant ov

59、er the three years. b. Operating leverage effect OLE = % change in EBIT / % change in sales. For 1998 = $1,124 - $3,847/$3,847/$30,910 -$45,187/$45,187 = 2.24 For 1999 relative to 1997 = $2,083 - $3,847/$3,847/$34,975 -$45,187/$45,187 = 2.03 OLE is similar for both years. c.OLE reflects the impact o

60、f fixed costs on profits as a result of changes in volume. Thus, for companies such as Texaco with high OLE, sales volume decreases impact profit margin percentages. Thus, the activity component and the operating margin component for companies with high fixed costs are not distinct. 精品资料学习 好资料20.La.