Laura Henderson, a 2008 graduate of George Fox University with 3 years of bankin
ID: 2646937 • Letter: L
Question
Laura Henderson, a 2008 graduate of George Fox University with 3 years of banking experience, was recently brought in as a financial analyst for Healthy Snack Foods Inc. (HSFI). a small food producer that operated in northern Florida and whose specialty was healthy pecan and other nut products sold alongside snack foods. HSFI's president, Al Watkins, decided in 2011 to undertake a major expansion and to "go national" in competition with Frito-Lay, Eagle, and other major snack foods companies. Watkins believed that HSFI's products were, and would be, of higher quality than the competition's. He further believed that this quality differential would enable it to charge a premium price, and that the end result would be greatly increased sales, profits, and stock price. Calculate the Operating, Investing and Financing Cash Flows for HFSI. Based on the Cash Flows, should Laura characterize the new Strategy as a "Success" or a "Failure". Can the new Strategy ever be a success? Please answer "Yes" or "No".Explanation / Answer
1)
b)Free cash flow = Cash flow from operating activity - capital expenditure
= 15 - 30
= $ - 15
cash flow from operating activity Net Income 20 Adjustment to reconcile net income to cash income Depreciation [40-30] 10 Increase in accounts receivable [29-36] -7 Increase in Inventory [61-75] -14 Increase in Accounts payable [45-39] 6 cash flow from operatinga ctivity [A] 15 cash flow from Investing activity Purchase of plant [210-180] - 30 Net cash flow from Investing activity [B] -30 cash flow from Financing activity Issuance of common stock [ 90-70] 20 Dividend paid [138+20-150 ] -8 Net cash flow from fiancing activty (C) 12 Net cash used durin g the year (A+B+C) -3 Add:Beginning cash balance 7 Balance at end 4Related Questions
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