7. South Sea Baubles, Inc. has the following highlights from its balance sheet a
ID: 2735555 • Letter: 7
Question
7. South Sea Baubles, Inc. has the following highlights from its balance sheet and income statements for FY 2013 and 2014.
Balance Sheet as of End of Fiscal Year
(Figures in Millions of USD)
2013
2014
Assets
Cash & Mkt. Securities
40
65
Other Current Assets
50
75
Net Fixed Assets
800
900
Liabilities
Current Liabilities
50
60
Long-Term Debt
600
700
Income Statement for Fiscal Year 2014
(Figures in Millions of USD)
Revenue
1,950
Cost of Goods Sold
1,030
Depreciation
350
Interest Expense
240
Assume South Sea Baubles, Inc. (the company in the prior question) neither issued nor retired any shares in 2014 and that its current portion of long-term debt remained unchanged in 2014 relative to the prior year. Construct SSB’s cash flow statement and answer the following:
What were SSB’s net cash flows from operations for 2014?
What were SSM’s net cash flows from investment activities in 2014?
What were SSB’s net cash flows from financing activities in 2014?
2013
2014
Assets
Cash & Mkt. Securities
40
65
Other Current Assets
50
75
Net Fixed Assets
800
900
Liabilities
Current Liabilities
50
60
Long-Term Debt
600
700
Explanation / Answer
Net cash flow from operations = Revenue – cost of goods sold –Interest + Increase in current liabilities – increase in current assets
= 1,950 -1030 -240 +(60-50) - (75-50)
= 680 +10-25
= 665
Cash flow from Investing activities = beginning net fixed assets - Ending net fixed assets – Depreciation
= 800-900 -350
= -450
Cash flow from financing activities = Ending long term debt – beginning long term debt
= 700 -600
= 100
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