Use the following information to create an income statement and balance sheet fo

Question

Use the following information to create an income statement and balance sheet for 2016 and 2017; assume the tax rate is 34%. Then, using those statements, calculate for 2017: • Cash flow from assets • Cash flow to creditors • Cash flow to stockholders 2016 2017 Sales 25,460 28,458 Depreciation expense 3,654 3,820 Cost of goods sold 8,754 10,356 Other expenses 2,082 1,812 Interest expense 1,708 2,038 Cash 13,348 14,226 Accounts receivable 17,674 20,742 Short-term notes payable 2,576 2,524 Long-term debt 44,704 54,198 Net fixed assets 111,954 119,400 Accounts payable 9,644 10,216 Inventory 31,422 33,634 Dividends 3,044 3,560

Explanation / Answer

Income Statement

2016

2017

Sales

$25460

$28458

- Cost of goods sold

$8754

$10356

Gross profit

$16706

$18102

- Depreciation expenses

$3654

$3820

- Other expenses

$2082

$1812

EBIT

$10970

$12470

- Interest expense

$1708

$2038

EBT

$9262

$10432

- Tax @ 34%

$3149

$3547

Net income

$6113

$6885

Balance Sheet

2016

2017

Current assets;

Cash

$13348

$14226

Accounts receivable

$17674

$20742

Inventory

$31422

$33634

Total current assets

$62444

$68602

Net fixed assets

$111954

$119400

Total assets

$174398

$188002

Liabilities;

Current liabilities:

Accounts payable

$9644

$10216

Short-term notes payable

$2576

$2524

Long-term debts

$44704

$54198

Total liabilities

$56924

$66938

Stockholders’ funds

$117474

$121064

Total liabilities and stockholders’ funds

$174398

$188002

1. Cash flow from assets;

Cash flow from assets = Operating cash flows - Addition to NWC – Capital spending

Operating cash flows $12470 + $3820 – $3547 = $12743

Additions to NWC ($55862 – $50224) = $5638

Capital spending ($119400 - $111954) + $3820 = $11266

Now, let’s put these values in the formula;

Cash flow from assets ($12743 - $5638 – $11266) = - $4161

2. Cash flow to creditors;

Cash flow to creditors = Interest – New long-term debt

Cash flow to creditors ($2038 – $9494) = - $7456

3. Cash flow to Stockholders;

Cash flow to stockholders = Cash flow from assets – Cash flow to creditors

Cash flow to stockholders -$4161 – (-7456) = $3295

Income Statement

2016

2017

Sales

$25460

$28458

- Cost of goods sold

$8754

$10356

Gross profit

$16706

$18102

- Depreciation expenses

$3654

$3820

- Other expenses

$2082

$1812

EBIT

$10970

$12470

- Interest expense

$1708

$2038

EBT

$9262

$10432

- Tax @ 34%

$3149

$3547

Net income

$6113

$6885

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