[10 POINTS] Statement of cash flows ratios. Financial statements for Hilton Comp

Question

[10 POINTS] Statement of cash flows ratios. Financial statements for Hilton Company are presented below: Hilton Company Balance Sheet December 31, 2017 Assets Stockhold Cash Accounts receivable Buildings and equipment Accumulated depreciation $ 40,000 35,000 150,000 Accounts payable Bonds payable Common stock Retained eamings S 20,000 50,000 65,000 (50,000) buildings and equipment Patents Hilton Company Statement of Cash Flows December 31, 2017 Cash flows from operating activities S50,000 Net income Adjustments to reconcile net income to net cash provided by operating activities Increase in accounts receivable Increase in accounts payable Depreciation-buildings and equipment Gain on sale of equipment Amortization of patents S(16,000) 8,000 15,000 (6,000) Net cash provided by operating activities Cash flows from investing activities 53,000 Sale of equipment Purchase of land Purchase of buildings and equipment 12,000 (25,000) (48.000) Net cash used by investing activities Cash flows from financing activities (61,000) (15,000) Payment of cash dividend Sale of bonds Net cash provided by financing activities Net increase in cash Cash, January 1, 2017 Cash, December 31, 2017 15.000 7,000 33.000 At the beginning of 2017, Accounts Payable amounted to $12,000 and Bonds Payable was $20,000 Instructions Calculate the following for Hilton Company: a. Current cash debt coverage b. Cash debt coverage c. Free cash flow d. Explain th e purpose of free cash flow analysis.

Explanation / Answer

a. Current cash debt coverage = Net cash provided by operating activities/ Average current liabilities

= $53000/ [($20000+$12000)/2]

= 3.3125

b. Cash coverage ratio = (Cash flow from operations - Payment of dividends)/ Total debt

= ($53000 - $15000)/ $70000

= 0.5429

c. Free cash flow = Cash flow from operations - Capital expenditures

= $53000 - $61000

= $(8000)

d. Free cash flow analysis helps in getting to know how much cash a business generates after incurring capital expenditures. That is this amount to cash can then be used for several other purposes such as for dividend payment, payment of debt, etc.

Related Questions

Navigate

• Browse (All)
• Browse #
• Subjects

---

---

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