Use the following Information to answer this question Windswept, Inc. 2010 Incom

Question

Use the following Information to answer this question Windswept, Inc. 2010 Income Statement ($ in millions) et sales ess: Cost of goods sold ess: Depreclation amings before interest and taxes ess: Interest pald Taxable Income ess: Taxes et Income $ 10,800 8,100 385 S 2,315 106 S 2,209 663 S1,546 Windswept, Inc 2009 and 2010 Balance Sheets (S In millions) 2010 2009 2010 2009 S 4 Cash Accounts rec nventory Total 425 Accounts payable $1,925 1,17 1.94 3,510 $3,295 Retained earnings 3,690 4,290 term deb 1800 Common stock 3,420 $3,17 68 930 3 et fixed assets Total assets $7.200 $7,585Total liab. & equity 72007.585 $72007.585 $7.2 What amount should be Included in the financing section of the 2010 statement of cash flows for dividends pald? $1,121 million $505 million $805 million O $250 million $1,296 million

Explanation / Answer

1. Cash paid in Dividends = Net income in 2010 - Increase in retained earnings

= [$1,546 - ($930 - $680)] millions

= $1,296 millions which is the fifth option

3. Sustainable growth rate = Profit margin * Total asset turnover ratio * Equity multiplier * (1 - Payout ratio)

= 6% * 1.2 * 1.4 * (1 - 37%)

= 6.35% which is closest to the third option

2. Inventory days = Inventory * 365 / Cost of goods sold

= $494 * 365 / $2,110

= 84.45 days which is the third option

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