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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 ...

Solution Summary

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

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