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If you're operating under the accrual method of accounting, sales and expenses often appear on financial statements before payment is received or made. A cash flow statement converts financial data recorded on an accrual basis in the income statement and balance sheet to a cash basis. The statement shows sources of cash receipts, where cash is spent, and the net change. To arrive at the net change, the statement focuses on three areas of activity:
1. Operations. Operating activities are a company's dally internal activities that generate cash or require its expenditure. These include cash collections, operating expenses (such as payroll, rent, supplies and inventory) and income taxes.
2. Investing. This varies depending on your industry. For example, with manufacturers, investing generally involves the purchase or sale of equipment.
3. Financing. Loans and leases that provide or require cash generally fall under financing. Which are greater? Can you operate without any of the three?
The National Bank of Columbia has issued perpetual preferred stock with a $100 par value. The bank pays a quarterly dividend of $1.50 on this stock. What is the current price of this preferred stock given a required rate of return of 8.5 percent? Pri..
Filer Manufacturing has 8 million shares of common stock outstanding. The current share price is $80, and the book value per share is $7. The company also has two bond issues outstanding. What are the company's capital structure weights on a book val..
Consider an exchange-traded call option contract to buy 500 shares with a strike price of $40 and maturity in 4 months. Explain how the terms of the option contract change when there is a 10% stock dividend;
A Treasury STRIPS matures in 8 years and has a yield to maturity of 5.4 percent. Assume the par value is $100,000. a. What is the price of the STRIPS?
Rudy Sandberg wants to invest in four-year bonds that are currently priced at $868.43. These bonds have a coupon rate of 6 percent and pay semiannual coupon payments. What is the current market yield on this bond?
Provide an example scenario with rationale of an area in your personal life in which you would like to apply, or have already applied, time value of money concepts. What might you do differently to effect a more financially sound future
Describe how a bank should apply an objective credit scoring model when evaluating consumer loan requests. Given the information in Exhibits 15.10 and 15.11 and in the text, indicate why you would or would not approve Rochelle Groome's loan request.
The city of Detroit is deciding whether or not to build an aquarium. Officials believe that a world-class stingray exhibit will attract families from across Michigan to visit the city. In turn, this will spur local businesses, lead to economic growth..
Benson Oil is being considered for acquisition by Dodd Oil. The combination, Dodd believes, would increase it cash inflows by $ 25,000 for each of the next 5 years and by $ 50,000 for each of the following 5 years. Benson has high financial leverage,..
We are learning that some risk can be mitigated by diversifying. In a portfolio of stocks, we simply buy stocks from lots of companies in different industries. What about poor Kelly. What can she do to avoid be crippled by some of the unsystematic ri..
How could vendors be encouraged to participate in Wal-Mart China’s sustainability initiatives? What are the distinguishing features of Wal-Mart China’s distribution system? How can Wal-Mart improve sustainability in its distribution and retail operat..
Quinlan Enterprises stock trades for $52.50 per share. It is expected to pay a $2.50 dividend at year end (D1 = $2.50), and the dividend is expected to grow at a constant rate of 5.50% a year. The before-tax cost of debt is 7.50%, and the tax rate is..
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