Reference no: EM132728980

Question - Gladys Inc. reported current assets totaling $65,800 and current liabilities totaling $28,750 at December 31, Year 2The company's income statement and statement of cash flow for Year 2 appear below:

Income Statement for Year 2 - Sales $283,200

Cost of goods sold 105,000

Depreciation expense 16,400

Other operating expenses 60,500

Interest expense 6,300

Income taxes expense 10,700

Net income $ 84,300

Statement of Cash Flow for Year 2 - Operating activities Net income $84,300

Depreciation expense 16,400

Accounts receivable (4,750)

Inventory 150

Accounts payable (3,050)

Income taxes payable 1,350

Cash flow from operations $94,400

Investing activities Marketable securities $1,000

Equipment (49,800)

Cash flow for investing (48,800)

Financing activities Common stock issued 9,500

Note payable borrowings 9,950

Note payable payments (8,750)

Dividends paid (15,500)

Cash flow for financing (4,800)

Net increase in cash 40,800

Cash, beginning of year 25,150

Cash, end of year $65,950

Required -

1. Calculate the following ratios and measures for Gladys Inc. for Year 2:

A. Operating funds ratio

B. Operating cash flow-to-current liabilities ratio

C. Cash conversion ratio

D. Earnings before interest, taxes, depreciation and amortization (EBITDA)

E. Free cash flow

F. Discretionary cash flow

2. What can you conclude about the cash flow health of Gladys Inc. from the ratios and measures?