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Balances as of Year Ended 31 December 2004 2005Retained earnings 120 145 Accounts receivable 38 43 Inventory 45 48 Accounts payable 36 29
The company declared and paid cash dividends of $10 million in 2005 and recorded depreciation expense in the amount of $25 million for 2005. The company ’ s 2005 cash fl ow from operations ($ millions) was closest to A. 25. B. 35. C. 45.
16. Silverago Incorporated, an international metals company, reported a loss on the sale of equipment of $2 million. In addition, the company ’ s income statement shows depreciation expense of $8 million and the cash fl ow statement shows capital expenditure of $10 million, all of which was for the purchase of new equipment. Using the following information from the comparative balance sheets, how much cash did the company receive from the equipment sale?
Balance Sheet Item 12/31/2005 12/31/2006 Change Equipment $100 million $105 million $5 million Accumulated depreciation — equipment $40 million $46 million $6 million
A. $6 million B. $5 million C. $1 million
17. Jaderong Plinkett Stores reported net income of $25 million, which equals the company ’ s comprehensive income. The company has no outstanding debt. Using the following information from the comparative balance sheets ($ millions), what should the company report in the fi nancing section of the statement of cash fl ows? Balance Sheet Item 12/31/2005 12/31/2006 Change Common stock $100 $102 $2 Additional paid - in capital common stock $100 $140 $40 Retained earnings $100 $115 $15 Total stockholders ’ equity $300 $357 $57 A. Issuance of common stock $42 million; dividends paid of $10 million B. Issuance of common stock $38 million; dividends paid of $10 million C. Issuance of common stock $42 million; dividends paid of $40 million
18. Based on the following information for Pinkerly Inc., what are the total net adjustments that the company would make to net income in order to derive operating cash fl ow? Year Ended Income Statement Item Net income Depreciation 12/31/2006 $20 million $2 million Balance Sheet Item 12/31/2005 12/31/2006 Change Accounts receivable $25 million $22 million ($3 million) Inventory $10 million $14 million $4 million Accounts payable $8 million $13 million $5 million A. Add $6 million B. Add $8 million C. Subtract $6 million
19. The fi rst step in evaluating the cash fl ow statement should be to examine A. individual investing cash fl ow items. B. individual fi nancing cash fl ow items. C. the major sources and uses of cash.
20. Which of the following would be valid conclusions from an analysis of the cash fl ow statement for Telef ó nica Group presented in Exhibit 6 - 3 in the chapter? A. The company does not pay dividends. B. The primary use of cash is fi nancing activities. C. The primary source of cash is operating activities.
21. Which is an appropriate method of preparing a common - size cash fl ow statement? A. Begin with net income and show the items that reconcile net income and operating cash fl ows. B. Show each line item on the cash fl ow statement as a percentage of net revenue. C. Show each line item on the cash fl ow statement as a percentage of total cash outfl ows.
22. Which of the following is an appropriate method of computing free cash fl ow to the fi rm? A. Add operating cash fl ows plus capital expenditures and deduct after - tax interest payments. Date: 2016-03-03; view: 855
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