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Free cash flows and financing cash flows

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Calculate the free cash flows and financing cash flows for Abrahams Manufacturing Company for the year ended December 31, 2008.

Company Balance Sheet for 12/31/2007 and 12/31/2008

2007 2008
Cash $ 89,000 $ 100,000
Accounts receivable 64,000 70,000
Inventory 112,000 100,000
Prepaid expenses 10,000 10,000
Total current assets 275,000 280,000
Gross plant and equipment 238,000 311,000
Accumulated depreciation (40,000) (66,000)
Total assets $ 473,000 $ 525,000

Accounts payable $ 85,000 $ 90,000
Accrued liabilities 68,000 63,000
Total current debt 153,000 153,000
Mortgage payable 70,000 0
Preferred stock 0 120,000
Common stock 205,000 205,000
Retained earnings 45,000 47,000
Total debt and equity $ 473,000 $ 525,000

Company Income Statement for the year ended 12/31/2008

2008
Sales $ 184,000
Cost of goods sold 60,000
Gross profit $ 124,000
Selling, general & admin. Expenses 44,000
Depreciation expense 26,000
Operating income $ 54,000
Interest expense 4,000
Earnings before taxes $ 50,000
Taxes 16,000
Preferred stock dividends 10,000
Earnings available to common shareholders $ 24,000

Additional Information
1. The only entry in the accumulated depreciation account is for 2008 depreciation.
2. The firm paid $ 22,000 in common stock dividends during 2008.

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Abrahams Manufacturing Company
Free Cash Flows:
Operating income 54,000
Depreciation 26,000
Income taxes (16,000)
After-tax cash flows from ...

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The solution explains how to calculate free cash flows and financing cash flows for Abrahams Manufacturing Company.

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See Also This Related BrainMass Solution

Dell analysis of cash provided by operating activities, fred cash flow, dividends

See attached files.

Case 7-1
Analysis of Cash Flows

Refer to the annual report of Dell in Appendix A:

Required:
a. Explain how the following items create differences between Dell's earnings from continuing operations and its net cash provided by operating activities:
(1) Depreciation and amortization
(2) Change in deferred taxes
(3) Decrease in receivables
(4) Decrease in inventories
b. Explain why net income is much less than cash from operations in 2005.
c. Calculate Dell's free cash flows for each of the past three years.
d. How has Dell used its free cash flows during the past three years?
e. How much cash has Dell returned to shareholders during each of the past three years and in total?

ANSWER CHECK: (c) 2005=$4,785

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