Reference no: EM131573325
Two company scenarios are listed below.
Based on the information provided in each scenario, calculate the corresponding
(a) Cash Coverage of Growth Ratio and the
(b) Free Cash Flows in the columns to the right of each scenario.
Your Ratios and Calculations should include the written definition, be labeled clearly, be presented in good form, and utilize cell referencing and formulas where applicable.
Scenario 1
A Statement of Cash Flows is presented below for Heavy Metal Corporation. Calculate the Cash Coverage of Growth Ratio and the Free Cash Flows for this company.
Heavy Metal Company
Statement of Cash Flows
For the year ending December 31, 2015
| Cash Flows from Operating Activities: |
|
|
Cash received from customers |
$ 1,288,436 |
|
Cash paid to suppliers |
(556,299) |
|
Cash paid for selling and administrative expenses |
(276,600) |
|
Cash paid for interest |
(3,500) |
|
Cash paid for taxes |
(25,460) |
|
|
Net Cash Flows Provided by Operating Activities |
426,577 |
|
|
|
|
| Cash Flows from Investing Activities: |
|
|
Proceeds from sale of long-term investment |
75,000 |
|
Purchase of heavy metal delivery truck |
(84,900) |
|
Purchase of new heavy metal storage warehouse |
(282,000) |
|
|
Net Cash Flows Used for Investing Activities |
(291,900) |
|
|
|
|
| Cash Flows from Financing Activities: |
|
|
Proceeds from new note payable |
300,000 |
|
Payment of principal on bond payable |
(50,000) |
|
Proceeds from issue of common stock shares |
41,000 |
|
|
Net Cash Flows Provided by Financing Activities |
291,000 |
|
|
|
|
| Net Cash Provided during year |
425,677 |
| Beginning Cash at January 1, 2015 |
1,853,908 |
| Ending Cash at December 31, 2015 |
$ 2,279,585 |
Check Figure for Scenario 1: Cash Coverage of Growth = 1.16. Note that cash paid for Property is inserted as a positive number to provide a positive ratio.
Scenario 2:
A Statement of Cash Flows is presented below for Good Grub Grocery. Calculate the Cash Coverage of Growth Ratio and the Free Cash Flows for this company.
Good Grub Grocery
Statement of Cash Flows
For the year ending December 31, 2015
| Cash Flows from Operating Activities: |
|
|
Cash received from customers |
$ 967,000 |
|
Cash paid to suppliers |
(644,000) |
|
Cash paid for selling and administrative expenses |
(227,000) |
|
Cash paid for interest |
(4,980) |
|
Cash paid for taxes |
(16,675) |
|
|
Net Cash Flows Provided by Operating Activities |
74,345 |
|
|
|
|
| Cash Flows from Investing Activities: |
|
|
Proceeds from sale of delivery truck |
4,500 |
|
Purchase of refrigerated display cases |
(13,445) |
|
Purchase of new forklifts |
(12,980) |
|
|
Net Cash Flows Used for Investing Activities |
(21,925) |
|
|
|
|
| Cash Flows from Financing Activities: |
|
|
Payment of principal on note payable |
(22,000) |
|
Proceeds from issue of common stock shares |
8,900 |
|
|
Net Cash Flows Used For Financing Activities |
(13,100) |
|
|
|
|
| Net Cash Provided during year |
39,320 |
| Beginning Cash at January 1, 2015 |
387,224 |
| Ending Cash at December 31, 2015 |
$ 426,544 |