P4-6 Finding operating and free cash flows data from the income statement of Kei
ID: 2722154 • Letter: P
Question
P4-6 Finding operating and free cash flows data from the income statement of Keith Corporation that appear below and on the next page. Consider the balance sheets and selected Keith Corporation Balance Sheets December 31 Assets Cash Marketable securities Accounts receivable Inventories 2012 2011 S1,500 1,000 1,200 1,800 2,900 2,800 S 8,200 $ 6,800 $29,500 $28,100 14,700 13,100 $14800 $15,000 $23,000 $21,800 1,800 2,000 Total current assets Gross fixed assets Less: Accumulated depreciation Net fixed assets Total assets Liabilities and Stockholders' Equity Accounts payable Notes payable Accruals s 1,600 2,800 200 $ 4,600 1,500 2,200 300 $ 4,000 Total current liabilities Long-term debt -5,000 5,000 Total liabilities Common stock Retained earnings $9,600 $ 9,000 $10,000 $10,000 3,400 2,800 $13,400 $12,800 Total liabilities and stockholders' equity $23,000 $21,800 Total stockholders' equity 0Explanation / Answer
Keith Corporation Details a Given Operating Profit+EBIT=2700 NOPAT = Operating Profit*(1-Tax Rate) =2700*(1-0.40)=1620 So NOPAT is $1620 b Cash flow Statement for the period ending Dec 31.2012. Indirect Method Details Amt $ Cash Flow From Operating Activities Net Income 1,400 Add Depreciation 1,600 Increased Accounts Receivable (200) Increased Inventory (100) Increased Accounts Payable 100 Decreased Accrued Expenses (100) Income Tax Payable Total Cash Flow From Operating Activities 2,700 ( Marketable security and Note payable to be considered in investing and Financing cash flow respectively) c Cash flow from operating activities 2,700 Less Capital Expenditure on fixed Asset= (1,400) Free cash flow= 1,300 d The cash flow estimates give a healthy impression for the firm as the operating cash flow is quite good and more than 50% of it is used for Capital expenditure to cater to future growth, So the outlook of the company looks good.
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