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 |
||
|
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