Question: In Problem 3-14, you were asked
In Problem 3-14, you were asked to prepare a statement of cash flows for Pamplin Inc. Pamplin’s financial statements are provided again on the next page. Using this information, compute the firm’s free cash flows and the financing cash flows, and interpret your results.
Data from Study Problems 3-14:
a. How much is the firm’s net working capital, and what is the debt ratio for 2014 and 2015?
b. Complete a common-sized income statement, a common-sized balance sheet, and a statement of cash flows for 2015. Interpret your results.
Transcribed Image Text:
Pamplin, Inc. Balance Sheet at 12/31/2014 and 12/31/2015 ASSETS 2014 2015 Cash $ 200 $ 150 Accounts receivable Inventory 450 425 550 625 Current assets $1,200 Plant and equipment $1,200 $2,600 $2,200 Less accumulated depreciation (1,000) (1,200) Net plant and equipment $1,200 $1.400 Total assets $2.400 $2.600 LIABILITIES AND OWNERS' EQUITY $ 200 Accounts payable Notes payable current (9%) $ 150 150 $ 200 $ 600 $ 300 $ 600 Current liabilities Long-term debt Owners' equity Common stock $ 900 $ 900 Retained earnings 700 800 Total owners' equity $1,600 $1.700 Total liabilities and owners' equity $2.400 $2,600 Pamplin, Inc. Income Statement for Years Ended 12/31/2014 and 12/31/2015 2014 2015 Sales $1,200 $1,450 Cost of goods sold Gross profit 850 700 $ 500 $ 600 Selling, general, and administrative expenses $ 30 $ 40 depreciation expense 220 250 200 240 Operating income $ 250 $ 360 Interest expense 50 64 Net income before taxes $ 200 $ 296 Taxes (40%) 80 118 Net income $ 120 $ 178 Pamplin, Inc. Balance Sheet at 12/31/2014 and 12/31/2015 Assets 2014 2015 Cash $ 200 $ 150 Accounts receivable 450 425 Inventory 550 625 Current assets $1,200 $1,200 Assets 2014 2015 Plant and equipment $2,200 (1,000) $1,200 $2.400 $2,600 Less Accumulated depreciation (1,200) Net plant and equipment $1,400 Total assets $2.600 Liabilities and Owners' EQUITY 2014 2015 Accounts payable $ 200 $ 150 Notes payable current (9%) 150 $ 200 $ 600 $ 300 $ 600 Current liabilities Bonds Owners' equity Common stock $ 900 $ 900 Retained earnings 700 800 Total owners' equity $1,600 $1.700 Total liabilities and owners' equity $2,400 $2.600 Pamplin, Inc. Income Statement for Years Ended 12/31/2014 and 12/31/2015 2014 2015 Sales $1,200 $1,450 Cost of goods sold 700 850 Gross profit $ 500 $ 600 Selling, general, and administrative expenses $ 30 $ 40 depreciation expense 220 250 200 240 Operating income $ 250 $ 360 Interest expense 50 64 Net income before taxes $ 200 $ 296 Taxes (40%) 80 118 Net income $ 120 $ 178
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