Could I please get a breakdown of the Net Cash From Operations for this problem? I can’t seem to wrap my head around it. Thanks.
1.
| The 2010 financial statements for Armstrong and Blair companies are summarized here: |
| Armstrong Company |
Blair Company |
|||
| Balance Sheet | ||||
| Cash | $ | 35,000 | $ | 22,000 |
| Accounts Receivable, Net | 40,000 | 30,000 | ||
| Inventory | 100,000 | 40,000 | ||
| Property and Equipment, Net | 180,000 | 300,000 | ||
| Other Assets | 45,000 | 408,000 | ||
|
|
|
|
|
|
| Total Assets | $ | 400,000 | $ | 800,000 |
|
|
|
|
|
|
| Current Liabilities | $ | 100,000 | $ | 50,000 |
| Long term Debt | 60,000 | 370,000 | ||
|
|
|
|
|
|
| Total Liabilities | 160,000 | 420,000 | ||
| Common Stock (par $10) | 150,000 | 200,000 | ||
| Additional Paid in Capital | 30,000 | 110,000 | ||
| Retained Earnings | 60,000 | 70,000 | ||
|
|
|
|
|
|
| Total Liabilities and Stockholders’ Equity | $ | 400,000 | $ | 800,000 |
|
|
|
|
|
|
| Income Statement | ||||
| Sales Revenue (1/3 on credit) | $ | 450,000 | $ | 810,000 |
| Cost of Goods Sold | (245,000) | (405,000) | ||
| Expenses (including interest and income tax) | (160,000) | (315,000) | ||
|
|
|
|
|
|
| Net Income | $ | 45,000 | $ | 90,000 |
|
|
|
|
|
|
| Selected Data from 2009 Statements | ||||
| Accounts Receivable, Net | $ | 20,000 | $ | 38,000 |
| Inventory | 92,000 | 45,000 | ||
| Property and Equipment, Net | 180,000 | 300,000 | ||
| Long term Debt | 60,000 | 70,000 | ||
| Total Stockholders’ Equity | 231,000 | 440,000 | ||
| Other Data | ||||
| Estimated value of each share at end of 2010 | $ | 18 | $ | 27 |
|
|
||||
|
The companies are in the same line of business and are direct competitors in a large metropolitan area. Both have been in business approximately 10 years, and each has had steady growth. One third of both companies’ sales are on credit. Despite these similarities, the management of each has a different viewpoint in many respects. Blair is more conservative, and as its president said, “We avoid what we consider to be undue risk.” Both companies use straight line depreciation, but Blair estimates slightly shorter useful lives than Armstrong. No shares were issued in 2010, and neither company is publicly held. Blair Company has an annual audit by a CPA but Armstrong Company does not. |
| Consider 365 days in a year.) |