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# Financial ratios for Just Dew It, Braam Fire; Cash flows for

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Question 7: (15 points)

Calculating Financial Ratios
Just Dew It Corporation reports the following balance sheet information for 2004 and 2005.

JUST DEW IT CORPORATION
2006 and 2007 Balance Sheets
Assets Liabilities and Owners' Equity
2006 2007 2006 2007
Current assets Current liabilities
Cash \$ 10,800 \$ 10,500 Accounts payable \$ 58,500 \$ 66,000
Accounts receivable 27,900 28,000 Notes payable 41,750 41,000
Inventory 64,500 61,300 Total \$ 100,250 \$ 107,000
Total \$ 103,200 \$ 99,800 Long-term debt \$ 56,600 \$ 63,900
Fixed assets Owners' equity
Net plant and equipment \$ 341,000 \$ 335,000 Common stock and paid-in surplus \$ 87,000 \$ 87,000
Retained earnings 200,350 176,900
Total \$ 287,350 \$ 263,900
Total assets \$ 444,200 \$ 434,800 Total liabilities and owners' equity \$ 444,200 \$ 434,800
________________________________________

Based on the given balance sheets, calculate the following financial ratios for each year (Do not include the percent sign (%). Negative amount should be indicated by a minus sign. Round your answers to 2 decimal places, e.g. 32.16.):

2006 2007
a. Current ratio

b. Quick ratio

c. Cash ratio

d. NWC to total assets ratio

e. Debt-equity ratio

Equity multiplier

f. Total debt ratio

Long-term debt ratio

________________________________________
Question 8: (8 points)

Du Pont Identity
Braam Fire Prevention Corp. has a profit margin of 9.3 percent, total asset turnover of 1.78, and ROE of 18.54 percent. The firm's debt-equity ratio is times. (Round your answer to 2 decimal places, e.g. 32.16.)

________________________________________

Question 9: (10 points)

Statement of Cash Flows
Some recent financial statements for Smolira Golf Corp. follow.

SMOLIRA GOLF CORP.
2006 and 2007 Balance Sheets
Assets Liabilities and Owners' Equity
2006 2007 2006 2007
Current assets Current liabilities
Cash \$ 734 \$ 815 Accounts payable \$ 885 \$ 1,163
Accounts receivable 2,165 2,259 Notes payable 648 756
Inventory 4,147 4,415 Other 95 169
Total \$ 7,046 \$ 7,489 Total \$ 1,628 \$ 2,088
Fixed assets Long-term debt \$ 4,336 \$ 4,463
Net plant and equipment \$ 13,648 \$ 17,250
Owners' equity
Common stock and paid-in surplus \$ 9,000 \$ 9,000
Retained earnings 5,730 9,188
Total \$ 14,730 \$ 18,188
Total assets \$ 20,694 \$ 24,739 Total \$ 20,694 \$ 24,739
________________________________________
SMOLIRA GOLF CORP.
2007 Income Statement
Sales \$ 30,150
Costs of goods sold 17,073
Depreciation 1,782
Earnings before interest and taxes \$ 11,295
Interest paid 437
Taxable Income \$ 10,858
Taxes (32 %) 3,475
Net income \$ 7,383
Dividends \$ 3,925
________________________________________

Required:
Prepare the 2007 statement of cash flows for Smolira Golf Corp. (Amounts to be deducted should be indicated with a minus sign. Round your answer to the nearest whole dollar amount, e.g. 32.)

SMOLIRA GOLF CORP.
Statement of Cash Flows
For 2007
Cash, beginning of the year \$

Operating activities
Net income \$

Plus:

\$

Less:

\$

\$

Net cash from operating activities \$

Investment activities

\$

Net cash from investment activities \$

Financing activities

\$

Net cash from financing activities

Net increase in cash \$

Cash, end of year \$

________________________________________
Question 10: (8 points)

Calculating Annuity Values
If you deposit \$1,100 at the end of each of the next 23 years into an account paying 8 percent interest, you will have \$ in the account in 23 years. How much will you have if you make deposits for 46 years? \$ (Round your answers to 2 decimal places, e.g. 32.16.)
________________________________________

Calculating Total Cash Flows
Bedrock Gravel Corp. shows the following information on its 2007 income statement: sales = \$132,100; costs = \$82,000; other expenses = \$5,100; depreciation expense = \$7,000; interest expense = \$12,000; taxes = \$8,060; dividends = \$7,894. In addition, you're told that the firm issued \$6,500 in new equity during 2007 and redeemed \$6,500 in outstanding long-term debt.
a. The 2007 operating cash flow is \$ .

b. The 2007 cash flow to creditors is \$ .

c. The 2007 cash flow to stockholders is \$ .

d. If net fixed assets increased by \$5,100 during the year, the addition to NWC is \$ .

#### Solution Preview

Question 7: (15 points)

Calculating Financial Ratios
Just Dew It Corporation reports the following balance sheet information for 2004 and 2005.

JUST DEW IT CORPORATION
2006 and 2007 Balance Sheets
Assets Liabilities and Owners' Equity
2006 2007 2006 2007
Current assets Current liabilities
Cash \$ 10,800 \$ 10,500 Accounts payable \$ 58,500 \$ 66,000
Accounts receivable 27,900 28,000 Notes payable 41,750 41,000
Inventory 64,500 61,300 Total \$ 100,250 \$ 107,000
Total \$ 103,200 \$ 99,800 Long-term debt \$ 56,600 \$ 63,900
Fixed assets Owners' equity
Net plant and equipment \$ 341,000 \$ 335,000 Common stock and paid-in surplus \$ 87,000 \$ 87,000
Retained earnings 200,350 176,900
Total \$ 287,350 \$ 263,900
Total assets \$ 444,200 \$ 434,800 Total liabilities and owners' equity \$ 444,200 \$ 434,800
________________________________________

Based on the given balance sheets, calculate the following financial ratios for each year (Do not include the percent sign (%). Negative amount should be indicated by a minus sign. Round your answers to 2 decimal places, e.g. 32.16.):

2006 2007
a. Current ratio

b. Quick ratio

c. Cash ratio

d. NWC to total assets ratio
%
%
e. Debt-equity ratio

Equity multiplier

f. Total debt ratio

Long-term debt ratio

________________________________________

________________________________________
a. Current ratio = Current Assets/Current Liabilities
2006 = 103,200/100,250 = 1.03
2007 = 99,800/107,000 = 0.93
b. Quick ratio = (Current Assets - Inventory)/Current Liabilities
2006 = (103,200 - 64,500)/100,250 = 0.39
2007 = (99,800 - 61,300)/107,000 = 0.36
c. Cash ratio = Cash/Current Liabilities
2006 = 10,800/100,250 = 0.11
2007 = 10,500/107,000 = 0.10
d. NWC to total assets ratio = (Current assets - Current liabilities)/Total assets
2006 = (103,200 - ...

#### Solution Summary

This solution is comprised of a detailed explanation to calculate financial ratios for Just Dew It and Braam Fire, prepare the 2007 statement of cash flows for Smolira Golf Corp., compute how much will you have if you make deposits for 46 years, and calculate total cash flows for Bedrock Gravel Corp.

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