Solution-Find change in amount and percentage of change

Find change in amount and percentage of change

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Reference no: EM133205445

Assume all variables remain constant, by how much ABC should change its capital expenditure to reach Accruals Ratio of 5%? present the change in amount and percentage of change. Present all calculations or how you obtained your results.

Given the following information for ABC comp
year	2,021
Revenue growth	5.0%
EBITDA	220,000.0

Net income	120,000.0
Depreciation and amortization	10,000.0
Increase in operating working capital	(5,000.0)
Operating cash flow	125,000.0

Capital expenditure	(14,500.0)
Investing cash flow	(14,500.0)

Debt issued (repaid)	5,000.0
Dividends paid	(30,000.0)
Financing cash flow	(25,000.0)

Beginning cash and equivalents	99,000.0
Net cash flow	85,500.0
Ending cash and equivalents	184,500.0

Beginning total assets	180,000.0
Ending total assets	275,000.0

The Accruals Ratio is computed by dividing EBITDA by Capital Expenditures. In order to obtain a 5 percent Accruals Ratio, ABC would need to raise its Capital Expenditures by $4,400.

EBITDA = $220,000
Capital Expenditures = $14,500
Accruals Ratio = $220,000/$14,500 = 15.17 percent
In order for ABC to achieve an Accruals Ratio of 5%, it would be necessary for the company to raise its Capital Expenditures by a total of $4,400.
$4,400/$14,500 = 30.34 percent
As a result, ABC would be required to make a 30.34 percent increase in the amount it spends on capital expenditures.

Reference no: EM133205445

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Find change in amount and percentage of change

Reference no: EM133205445

Reference no: EM133205445

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