Using the Baker Corporation’s balance sheets in Table 3.5, we see that its change in net fixed assets between 2002 and 2003 was+$200 ($1,200 in 2003 $1,000 in 2002). Substituting this value and the $100 of depreciation for 2003 into Equation 3.4, we get Baker’s net fixed asset investment (NFAI) for 2003:

NFAI=$200+$100=$300

Baker Corporation therefore invested a net $300,000 in fixed assets during 2003. This amount would, of course, represent a net cash outflow to acquire fixed assets during 2003.

TABLE 3.5

 

Baker Corporation Balance
Sheets ($000)

 

December 31

Assets

2003

2002

Current assets

 

 

Cash

$400

$300

Marketable securities

600

200

Accounts receivable

400

500

Inventories

600

900

Total current assets

$2,000

$1,900

Gross fixed assets (at cost)

 

 

Land and buildings

$1,200

$1,050

Machinery and equipment

850

800

Furniture and fixtures

300

220

Vehicles

100

80

Other (includes certain leases)

50

50

Total gross fixed assets (at cost)

$2,500

$2,200

Less: Accumulated depreciation

1,300

1,200

Net fixed assets

$1,200

$1,000

Total assets

$3,200

$2,900

Liabilities and Stockholders’ Equity

 

 

Current liabilities

 

 

Accounts payable

$700

$500

Notes payable

600

700

Accruals

100

700

Total current liabilities

$1,400

200

Long term debt

$600

$1,400

Total liabilities

$2,000

$1,800

Stockholders’ equity

 

 

Preferred stock

$100

$100

Common stock—$1.20 par, 100,000 shares

 

 

outstanding in 2003 and 2002

120

120

Paid in capital in excess of par on common stock

380

380

Retained earnings

600

500

Total stockholders’ equity

$1,200

$1,100

Total liabilities and stockholders’ equity

$3,200

$2,900

Equation 3.4

NFAI=Change in net fixed assets + Depreciation