Cash Flow Analysis
Following are data from the financial statements for Shang Hi Company:
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Shang Hi Company |
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Selected Financial Statement Data |
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For the Years Ended December 31, 2008 and 2007 |
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(In millions of dollars) |
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2008 |
2007 |
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Sales |
$ 81,000 |
$73,000 |
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Total assets |
101,000 |
92,000 |
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Stockholders’ equity |
30,000 |
27,000 |
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Net income |
7,700 |
6,800 |
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Cash from operations |
10,200 |
18,500 |
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Cash paid for capital expenditures |
12,400 |
10,600 |
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Cash paid for acquisitions |
3,200 |
500 |
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Cash paid for interest |
1,200 |
1,000 |
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Cash paid for income taxes |
3,900 |
3,500 |
Instructions:
1. Compute the following for 2007 and 2008.
(a) Return on sales
(b) Return on assets
(c) Return on equity
(d) Cash flow to net income ratio
(e) Cash flow adequacy ratio
(f) Cash times interest earned ratio
2. In which year did Shang Hi Company perform better, 2007 or 2008? Explain your answer.
3. Shang Hi Company intends to sell a large block of newly issued stock to the public in the first half of 2009. Given your computations in (1), what questions would you like to ask of Shang His management before investing in the newly issued stock?