Calculate the firms cash flows

Assignment Help Financial Accounting

Reference no: EM131179467

SITUATION

At the beginning of f2007 mary Abrahams purchased a small business the turpen company whose income statement and balance are shown below:

Income Statement for the Tureen Company for 2007

Sales revenue Cost of goods sold Gross profit Operating expenses:		$175,000 105,000
		70,000
Depreciation	$ 5.000
Administrative expenses	20,000
Selling expenses	26 000
Total operating expenses		51,000
Operating Income		19,000
interest expense		3,000
Earnings before taxes		16,000
Taxes		8,000
Net income		8,000

Balance Sheets for the Turpen Company for 2006 and 2007

	2006	2007
Assets
Current assets:
Cash	8,000	10,000
Accounts receivable	15,000	20,000
Inventories	22,000	25,000
Total current assets	$45,000	$ 55,000
Axed assets:
Gross fixed assets	$50,000	$ 55,000
Accumulated depreciation	(15,000)	(20,000)
Net fixed assets	$35,000	$ 35,000
Other assets	12,000	10,000
TOTAL ASSETS	$92,000	$100,000
Debt (weenies) and Equity
Current debt:
Accounts payable	$10,000	$ 12,000
Accruals	7,000	8,000
Shorttenn notes	5,000	5,000
Total current debt	$22,000	25,000
longterm debt	15,000	15,000
Total debt	$37,000	$ 40,000
Equity	$ 55,000	$ 60,000
TOTAL DEBT AND EQUITY	$92,000	$100,000

The arm has been profitable, but Abrahams has been disappointed by the lack of cash flows. She had hoped to have about 510.000 a year available for Personal Wing expenses. However, there never seems to be much cash available for purposes other than business needs. Abrahams has asked you to examine the finan dal statements and explain why, although they shOw profits. she does not have any discretionary cash for personal needs. She observed, "I thought that I could take the profits and add depreciation to find out how much cash I was generating. However, that doesn't seem to be the case. What's happening?"

1 Given the information provided by the financial statements, what would you tell Abrahams? (As part of your answer, calculate the firm's cash flows.)

2. How would you describe the cash flow pattern for the Torben Company?

Reference no: EM131179467

Questions Cloud

Describe the organisational culture or leadership style : MGT100 INTRODUCTION TO MANAGEMENT - Briefly trace the development and growth of the organisation from its beginnings to the present through the application of corporate strategies - what types of strategies have these been?

Identify the correct statement about echo boomers : Identify the correct statement about "echo boomers." Which one of the following institutions involved in a supply chain would take title to the goods it is dealing with?

Compute the volume of stone in the stockpile : A stockpile of highway crushed stone is shaped into a conical figure; the base has a diameter of 72 ft, and the height of the stockpile is 52.5 ft. Compute the volume (cu. yd) of stone in the stockpile.

Outline options that future hold for healing hands hospital : Create a PowerPoint presentation (4-6 slides) outlining some options that the future may hold for Healing Hands Hospital. Include the Future health care trends information in your presentation.

Calculate the firms cash flows : Given the information provided by the financial statements, what would you tell Abrahams?- Calculate the firm's cash flows.

Describe why some excavation equipment is well suited : Data can be obtained from the library, trade and professional journals, equipment dealers or manufacturers, and construction companies

Summary of key aspects of early developmental milestones : Your task is to provide a summary of the key aspects of the early developmental milestones. You are to look at 6 age groups Birth - 12 months I-2 years 2-3 years 3-4 years 4-5 years 5-6 years

Evaluate level of efficiency of utilization of the tool : Select one business project that used one of the tools discussed in the textbook. Evaluate level of the efficiency and effectiveness of the utilization of the tool within the project that you selected.

Which of those drawings does the construction surveyor : A new bridge may require twenty to thirty drawings in the contract drawing package. Which of those drawings does the construction surveyor typically consult for the data needed to provide the survey layout?

User Account

All Pages