All Related Questions of Operating Cash Flow

Q: Suppose you have been hired as a financial consultant to Defense Electronics

Suppose you have been hired as a financial consultant to Defense Electronics, Inc. (DEI), a large, publicly traded firm that is the market share leader in radar detection systems (RDSs). The company i...

Q: Cusic Industries had the following operating results for 2012: sales =

Cusic Industries had the following operating results for 2012: sales = $19,900; cost of goods sold = $14,200; depreciation expense = $2,700; interest expense = $670; dividends paid = $650. At the begi...

Q: Allied Products, Inc., is considering a new product launch.

Allied Products, Inc., is considering a new product launch. The firm expects to have an annual operating cash flow of $10.5 million for the next 10 years. Allied Products uses a discount rate of 13 pe...

Q: M.V.P. Games, Inc., has hired

M.V.P. Games, Inc., has hired you to perform a feasibility study of a new video game that requires a $7 million initial investment. M.V.P. expects a total annual operating cash flow of $1.3 million fo...

Q: Stanley and Jones Lawn Service Company (S&J) maintains

Stanley and Jones Lawn Service Company (S&J) maintains its books on a cash basis. However, the company recently borrowed $100,000 from a local bank and the bank requires S&J to provide annual...

Q: Listed below are several transactions that took place during the first two

Listed below are several transactions that took place during the first two years of operations for the law firm of Pete, Pete, and Roy. In addition, you learn that the firm incurred utility costs of $...

Q: Lucas Hunter, president of Simmons Industries Inc., believes that reporting

Lucas Hunter, president of Simmons Industries Inc., believes that reporting operating cash flow per share on the income statement would be a useful addition to the company’s just completed financial s...

Q: Assume that in early January 2012, an Early Bird Café purchased

Assume that in early January 2012, an Early Bird Café purchased a building, paying $54,000 cash and signing a $104,000 note payable. The restaurant paid another $65,000 to remodel the building. Furnit...

Q: Assume that in early January 2012, a Sunshine Bakery restaurant purchased

Assume that in early January 2012, a Sunshine Bakery restaurant purchased a building, paying $53,000 cash and signing a $103,000 note payable. The restaurant paid another $66,000 to remodel the buildi...

Q: Why is it not necessarily bad for the operating cash flow to

Why is it not necessarily bad for the operating cash flow to be negative for a particular period?

Q: The accounting records of Mid West Distributors, Inc., reveal the

The accounting records of Mid West Distributors, Inc., reveal the following: Requirement Compute cash flows from operating activities by the indirect method. Use the format of the operating activiti...

Q: The accounting records of South Central Distributors, Inc., reveal the

The accounting records of South Central Distributors, Inc., reveal the following: Requirement Compute cash flows from operating activities by the indirect method. Use the format of the operating act...

Q: Continuing the previous problem, what is the operating cash flow for

Continuing the previous problem, what is the operating cash flow for the project in year 2?

Q: The Offshore Investment Fund (OIF) was incorporated in Fairfield,

The Offshore Investment Fund (OIF) was incorporated in Fairfield, Connecticut, for the sole purpose of allowing U.S. shareholders to invest in Spanish securities. The fund is listed on the New York St...

Q: Katie Murphy is preparing for a meeting with her banker. Her

Katie Murphy is preparing for a meeting with her banker. Her business is finishing its fourthyear of operations. In the first year, it had negative cash flows from operations. In the second and third...

Q: A company reported average total assets of $1,240,

A company reported average total assets of $1,240,000 in 2012 and $1,510,000 in 2013. Its net operating cash flow in 2012 was $102,920 and $138,920 in 2013. Calculate its cash flow on total assets rat...

Q: Economic Exposure of Albion Computers PLCConsider Case 3 of Albion Computers PLC

Economic Exposure of Albion Computers PLCConsider Case 3 of Albion Computers PLC discussed in the chapter. Now, assume thatthe pound is expected to depreciate to $1.50 from the current level of $1.60...

Q: Empirical research cited in the text indicates that firms with an operating

Empirical research cited in the text indicates that firms with an operating cash flow to current liabilities ratio exceeding 0.40 portray low short-term liquidity risk. Similarly, firms with an operat...

Q: Sun Microsystems, Inc., develops, manufactures, and sells computers

Sun Microsystems, Inc., develops, manufactures, and sells computers for network systems. Exhibit 5.21 presents selected financial data for Sun Microsystems for each of the five years ending June 30, 2...

Q: Refer to the financial statement data for Hasbro in Problem 4.

Refer to the financial statement data for Hasbro in Problem 4.24 in Chapter 4. Exhibit 5.15 presents risk ratios for Hasbro for Year 2 and Year 3. Financial statement data for Hasbro from Problem 4.2...

Q: Refer to the profitability ratios of Coca-Cola in Problem 4

Refer to the profitability ratios of Coca-Cola in Problem 4.26. Exhibit 5.17 presents risk ratios for Coca-Cola for 2006–2008. As we did within the chapter for PepsiCo, we utilize Co...

Q: Delta Air Lines, Inc., is one of the largest airlines

Delta Air Lines, Inc., is one of the largest airlines in the United States. It has operated on the verge of bankruptcy for several years. Exhibit 5.18 presents selected financial data for Delta Air Li...

Q: A firm has experienced an increasing current ratio but a decreasing operating

A firm has experienced an increasing current ratio but a decreasing operating cash flow to current liabilities ratio during the last three years. What is the likely explanation for these results?

Q: One measure of the effective tax rate is the difference between the

One measure of the effective tax rate is the difference between the IRRs of pretax and after-tax cash flows, divided by the pretax IRR. Consider, for example, an investment I generating a perpetual st...

Q: Restate the net cash flows in Table 6.6 in real

Restate the net cash flows in Table 6.6 in real terms. Discount the restated cash flows at a real discount rate. Assume a 20% nominal rate and 10% expected inflation. NPV should be unchanged at +3,802...

Q: Flip back to Tables 6.2 and 6.6,

Flip back to Tables 6.2 and 6.6, where we assumed an economic life of seven years for IM&€™s guano plant. What’s wrong with that assumption? How would you undertake a m...

Q: a. Use the Dynamic Mattress model (Tables 29.9

a. Use the Dynamic Mattress model (Tables 29.9 to 29.11) and the spreadsheets to produce pro forma income statements, balance sheets, and statements of cash flows for 2016 and 2017. Assume business as...

Q: Table 29.19 shows the 2016 financial statements for the Executive

Table 29.19 shows the 2016 financial statements for the Executive Cheese Company. Annual depreciation is 10% of fixed assets at the beginning of the year, plus 10% of new investment. The c...

Q: The accounting records of Bronson Plumbing, Inc., reveal:

The accounting records of Bronson Plumbing, Inc., reveal: Requirements 1. Compute cash flows from operating activities by the direct method. 2. Evaluate the operating cash flow of Bronson Plumbing,...

Q: The accounting records of Perry & Associates, Inc., reveal:

The accounting records of Perry & Associates, Inc., reveal: Requirements 1. Compute cash flows from operating activities by the indirect method. Use the format of the operating activities secti...

Q: Hornet Company had operating cash flow of $60,000 during

Hornet Company had operating cash flow of $60,000 during a year in which it paid dividends of $11,000. What does this indicate about Hornet’s dividend-paying ability?

Q: Suppose a company’s operating cash flow has been negative for several years

Suppose a company’s operating cash flow has been negative for several years running. Is this necessarily a good sign or a bad sign?

Q: Sunset Boards is a small company that manufactures and sells surfboards in

Sunset Boards is a small company that manufactures and sells surfboards in Malibu. Tad Marks, the founder of the company, is in charge of the design and sale of the surfboards, but his background is i...

Q: Dahlia Industries had the following operating results for 2009: sales =$

Dahlia Industries had the following operating results for 2009: sales =$22,800; cost of goods sold =$16,050; depreciation expense =$4,050; interest expense =$1,830; dividends paid =$1,300. At the begi...

Q: A proposed new project has projected sales of $108,000

A proposed new project has projected sales of $108,000, costs of $51,000, and depreciation of $6,800. The tax rate is 35 percent. Calculate operating cash flow using the four different approaches desc...

Q: An increase in inventories is deducted from net income to arrive at

An increase in inventories is deducted from net income to arrive at operating cash flow because a. cash payments to customers were larger than the purchases made during the period. b. purchases are l...

Q: During the year, Hepworth Company earned a net income of $

During the year, Hepworth Company earned a net income of $61,725. Beginning and ending balances for the year for selected accounts are as follows: There were no financing or investing activities for...

Q: How do the concepts of operating cash flow and free cash flow

How do the concepts of operating cash flow and free cash flow to equity differ?

Q: LearnRite.com offers e-commerce service for children’s “edutainment

LearnRite.com offers e-commerce service for children’s “edutainment” products and services. The word edutainment is used to describe software that combines “educational” and “entertainment” components...

Q: Pendleton Automotive Corp. is a medium-sized wholesaler of automotive

Pendleton Automotive Corp. is a medium-sized wholesaler of automotive parts. It has 10 stockholders who have been paid a total of $1 million in cash dividends for 8 consecutive years. The board’s poli...

Q: Shrieves Casting Company is considering adding a new line to its product

Shrieves Casting Company is considering adding a new line to its product mix, and the capital budgeting analysis is being conducted by Sidney Johnson, a recently graduated MBA. The production line wou...

Q: The financial staff of Cairn Communications has identified the following information for

The financial staff of Cairn Communications has identified the following information for the first year of the roll-out of its new proposed service: The Company faces a 40% tax rate. What is the proje...

Q: The Scampini Supplies Company recently purchased a new delivery truck. The

The Scampini Supplies Company recently purchased a new delivery truck. The new truck cost $22,500, and it is expected to generate net after-tax operating cash flows, including depreciation, of $6,250...

Q: As indicated in the case at the beginning of this chapter,

As indicated in the case at the beginning of this chapter, Xerox was manipulating income between the years 1997 through 1999. Below are revenue, gross profit, net income, and operating cash flow data...

Q: You have been asked to attend a hastily called meeting of Landfil’s

You have been asked to attend a hastily called meeting of Landfil’s senior executives. The meeting was called to formulate a strategy for responding to questions from shareholders, analysts, and the m...

Q: Locate the 2009 financial statements for The Walt Disney Company on the

Locate the 2009 financial statements for The Walt Disney Company on the Internet and consider the following questions: 1. Does Disney use the direct method or the indirect method? Explain. 2. Analyze...

Q: Using the following income statement and cash flow adjustment information, prepare

Using the following income statement and cash flow adjustment information, prepare the Operating Cash Flow section of the statement of cash flows using the direct method. Sales . . . . . . . . . . ....

Q: Refer to Practice 5-9. Prepare the Operating Cash Flow

Refer to Practice 5-9. Prepare the Operating Cash Flow section of the statement of cash flows using the indirect method. In Practice 5-9 Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . ....

Q: Why is it not necessarily bad for the operating cash flow to

Why is it not necessarily bad for the operating cash flow to be negative for a particular period?

Q: Cusic Industries had the following operating results for 2015: sales 5

Cusic Industries had the following operating results for 2015: sales 5 $20,300; cost of goods sold 5 $14,500; depreciation expense 5 $2,900; interest expense 5 $690; dividends paid 5 $660. At the begi...

Q: We are examining a new project. We expect to sell 7

We are examining a new project. We expect to sell 7,000 units per year at $38 net cash flow apiece for the next 10 years. In other words, the annual operating cash flow is projected to be $38 3 7,000...

Q: Allied Products, Inc., is considering a new product launch.

Allied Products, Inc., is considering a new product launch. The firm expects to have an annual operating cash flow of $13.5 million for the next 10 years. Allied Products uses a discount rate of 13 pe...

Q: This is a comprehensive project evaluation problem bringing together much of what

This is a comprehensive project evaluation problem bringing together much of what you have learned in this and previous chapters. Suppose you have been hired as a financial consultant to Defense Elec...

Q: As a shareholder of a firm that is contemplating a new project

As a shareholder of a firm that is contemplating a new project, would you be more concerned with the accounting break-even point, the cash break-even point (the point at which operating cash flow is z...

Q: M.V.P. Games, Inc., has hired

M.V.P. Games, Inc., has hired you to perform a feasibility study of a new video game that requires an initial investment of $8 million. M.V.P. expects a total annual operating cash flow of $1.5 millio...

Q: The company assembled the following information with respect to operating cash flow

The company assembled the following information with respect to operating cash flow for the year: Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....

Q: You and your partner own a small data-entry company.

You and your partner own a small data-entry company. You contract with businesses to manually enter data, such as library card catalogs and medical records, into a computer database. Your most signifi...

Q: Refer to Practice 15-6. Net income for the year

Refer to Practice 15-6. Net income for the year was $10,000. Except for lease-related items, there were no changes in current operating assets or liabilities during the year, no purchases or sales of...

Q: Assume that in January 2010, an Oatmeal House restaurant purchased a

Assume that in January 2010, an Oatmeal House restaurant purchased a building, paying $56,000 cash and signing a $107,000 note payable. The restaurant paid another $61,000 to remodel the building. Fur...

Q: Assume that in January 2010, an International Eatery restaurant purchased a

Assume that in January 2010, an International Eatery restaurant purchased a building, paying $52,000 cash and signing a $106,000 note payable. The restaurant paid another $62,000 to remodel the buildi...

Q: You are examining the viability of a capital investment in which your

You are examining the viability of a capital investment in which your firm is interested. The project will require an initial investment of $500,000 and the projected revenues are $400,000 a year for...

Q: You have been hired as a capital budgeting analyst by a sporting

You have been hired as a capital budgeting analyst by a sporting goods firm that manufactures athletic shoes and has captured 10% of the overall shoe market (the total market is worth $100 million a y...

Q: Katie Murphy is preparing for a meeting with her banker. Her

Katie Murphy is preparing for a meeting with her banker. Her business is finishing its fourth year of operations. In the first year, it had negative cash flows from operations. In the second and third...

Q: Templeton Automotive Corp. is a medium-sized wholesaler of automotive

Templeton Automotive Corp. is a medium-sized wholesaler of automotive parts. It has 10 stockholders who have been paid a total of $1 million in cash dividends for 8 consecutive years. The board’s poli...

Q: A company reported average total assets of $1,240,

A company reported average total assets of $1,240,000 in 2014 and $1,510,000 in 2015. Its net operating cash flow was $102,920 in 2014 and $138,920 in 2015. Calculate its cash flow on total assets rat...

Q: The accounting records of North East Distributors, Inc., reveal the

The accounting records of North East Distributors, Inc., reveal the following: Requirement 1. Compute cash flows from operating activities by the indirect method. Use the format of the operating act...

Q: The accounting records of Central Distributors, Inc., reveal the following

The accounting records of Central Distributors, Inc., reveal the following: Requirement 1. Compute cash flows from operating activities by the indirect method. Use the format of the operating activi...

Q: Arbortech, a designer, manufacturer, and marketer of PC cards

Arbortech, a designer, manufacturer, and marketer of PC cards for computers, printers, telecommunications equipment, and equipment diagnostic systems, was the darling of Wall Street during Year 6. Its...

Q: The first decade of the 21st century witnessed a flurry of losses

The first decade of the 21st century witnessed a flurry of losses, bankruptcies, acquisitions, and strategic partnerships in the airline industry. The heavily levered firms in the industry are particu...

Q: Refer to the financial statement data for Hasbro in Problem 4.

Refer to the financial statement data for Hasbro in Problem 4.24 in Chapter 4. Exhibit 5.14 presents risk ratios for Hasbro for Year 2 and Year 3. Financial statement in 4.24: Exhibit 5.14: REQUI...

Q: Refer to the financial statement data for Abercrombie & Fitch in Problem

Refer to the financial statement data for Abercrombie & Fitch in Problem 4.25 in Chapter 4. Exhibit 5.15 presents risk ratios for Abercrombie & Fitch for fiscal Year 3 and Year 4. Financial s...

Q: Exhibit 5.16 presents risk ratios for Coca-Cola for

Exhibit 5.16 presents risk ratios for Coca-Cola for Year 1 through Year 3. Exhibit 5.16: REQUIRED: a. Assess the changes in the short-term liquidity risk of Coca-Cola between Year 1 and Year 3. b....

Q: Delta Air Lines, Inc., is one of the largest airlines

Delta Air Lines, Inc., is one of the largest airlines in the United States. It has operated on the verge of bankruptcy for several years. Exhibit 5.17 presents selected financial data for Delta Air Li...

Q: Sun Microsystems, Inc., develops, manufactures, and sells computers

Sun Microsystems, Inc., develops, manufactures, and sells computers for network systems. Exhibit 5.20 presents selected financial data for Sun Microsystems for each of the five years ending June 30, Y...

Q: Exhibit 5.26 presents risk ratios for Walmart for 2014 and

Exhibit 5.26 presents risk ratios for Walmart for 2014 and 2013. Exhibits 1.19, 1.20, and 1.21 in Chapter 1 present the financial statements for Walmart. REQUIRED: a. Compute the values of each of th...

Q: We’re in the business of satisfying thirst. We do it very

We’re in the business of satisfying thirst. We do it very well. We’re also thirsty ourselves. Thirsty for continued profitable growth. Every gain delivers more for...

Q: Head Donuts Inc. is a retailer of designer headphones, earphones

Head Donuts Inc. is a retailer of designer headphones, earphones, and hands-free audio devices. Polly Ester, the company president, is reviewing the company’s financial statements after the close of t...

Q: 1. What are free cash flows? 2. Explain

1. What are free cash flows? 2. Explain the difference between a company’s operating cash flow and its free cash flow. 3. Briefly describe the key features of the free cash flow approach to valuation....

Q: Shelter Products sells portable livestock shelters to hog producers in the Central

Shelter Products sells portable livestock shelters to hog producers in the Central and Midwest regions of the United States. The terms of sale require cash payment within 30 days, and most customers t...

Q: It’s late Tuesday evening, and you’ve just received a phone call

It’s late Tuesday evening, and you’ve just received a phone call from Dennis Whiting, your boss at GE Capital. Dennis wants to know your reaction to the Argenti loa...

Q: Swiss Valley Veterinary Products distributes animal health care products to commercial livestock

Swiss Valley Veterinary Products distributes animal health care products to commercial livestock producers throughout the United States and Europe. Its terms of sale require cash payment within 30 day...

Q: If VirtualCon had decided to slow its payment of accounts payable by

If VirtualCon had decided to slow its payment of accounts payable by 90 days instead of entering into a financing arrangement with the bank, what would be the impact on its operating cash flow (CFO) a...

Q: Weston Corporation had earnings per share of $1.64,

Weston Corporation had earnings per share of $1.64, depreciation expense of $310,000, and 140,000 shares outstanding. What was the operating cash flow per share? If the share price was $43, what was t...

Q: Which of the following statements about VirtualCon’s securitization of receivables is least

Which of the following statements about VirtualCon’s securitization of receivables is least accurate? a. Accelerates operating cash flow into the current period. b. Enables the firm to reclassify fina...

Q: Gardenia Co. and Lantana Co. both operate in the same

Gardenia Co. and Lantana Co. both operate in the same industry. Gardenia began its operations in 2017 with a $20 million initial investment in plant and equipment with an expected life of 10 years. La...

Q: Excerpts from the financial statements of Stanley Black & Decker, Inc

Excerpts from the financial statements of Stanley Black & Decker, Inc. follow. From Stanley Black & Decker’s Accounts receivable note: Required: 1. Determine the diff...

Q: Puebla Corporation is a medium-sized hotel corporation. It has

Puebla Corporation is a medium-sized hotel corporation. It has ten stockholders, who have been paid a total of $1 million in cash dividends for eight consecutive years. The policy of the board of dire...

Q: At an output level of 65,000 units, you calculate that

At an output level of 65,000 units, you calculate that the degree of operating leverage is 3.40. If output rises to 70,000 units, what will the percentage change in operating cash flow be? Will the ne...

Q: In the previous problem, suppose fixed costs are $130,000. What

In the previous problem, suppose fixed costs are $130,000. What is the operating cash flow at 58,000 units? The degree of operating leverage?Previous problem:At an output level of 65,000 units, you ca...

Q: A proposed project has fixed costs of $73,000 per year.

A proposed project has fixed costs of $73,000 per year. The operating cash flow at 8,000 units is $87,500. Ignoring the effect of taxes, what is the degree of operating leverage? If units sold rise fr...

Q: At an output level of 10,000 units, you have calculated

At an output level of 10,000 units, you have calculated that the degree of operating leverage is 2.35. The operating cash flow is $43,000 in this case. Ignoring the effect of taxes, what are fixed cos...

Q: In the previous problem, what will be the new degree

In the previous problem, what will be the new degree of operating leverage in each case?Previous problem:At an output level of 10,000 units, you have calculated that the degree of operating leverage i...

Q: This is a comprehensive project evaluation problem bringing together much

This is a comprehensive project evaluation problem bringing together much of what you have learned in this and previous chapters. Suppose you have been hired as a fi nancial consultant to Defense Elec...

Q: Describe how the pretax operating cash flow break-even point is

Describe how the pretax operating cash flow break-even point is related to the economic break-even point?

Q: How does the pretax operating cash flow for a project differ from

How does the pretax operating cash flow for a project differ from the economic profit for that project?

Q: Calculate the accounting operating profit break-even point and pretax operating

Calculate the accounting operating profit break-even point and pretax operating cash flow break-even point for each of the three production choices outlined below?

Q: The pretax operating cash flow of Memphis Motors declined so much during

The pretax operating cash flow of Memphis Motors declined so much during the recession of 2008 and 2009 that the company almost defaulted on its debt. The owner of the company wants to change the cost...

Q: For the Vinyl CD Co. in Self-Study Problem 12

For the Vinyl CD Co. in Self-Study Problem 12.3, what percentage increase in pretax operating cash flow will be driven by the additional revenue?

Q: Calculate the pretax operating cash flow break-even point for both

Calculate the pretax operating cash flow break-even point for both factory choices for Dandle’s Candles? Use the following information below: Dandle’s Candles will be producing a new line of dripless...

Q: What is the difference between the pretax operating cash flow break-

What is the difference between the pretax operating cash flow break-even point and the accounting operating profit break-even point?

Q: Using the same logic as with the accounting break-even calculation

Using the same logic as with the accounting break-even calculation in Problem 12.19, adapt the formula for crossover level of unit sales to find the number of units sold where the pretax operating cas...

Q: You are considering investing in a business that has monthly fixed costs

You are considering investing in a business that has monthly fixed costs of $5,500 and sells a single product that costs $35 per unit to make. This product sells for $90 per unit. What is the annual p...

Q: Assume that on January 1, 2016, Merriman Steakhouse restaurant purchased

Assume that on January 1, 2016, Merriman Steakhouse restaurant purchased a building, paying $55,000 cash and signing a $108,000 note payable. The restaurant paid another $66,000 to remodel the buildi...

Q: Assume that on January 1, 2016, Shipley Sushi purchased a

Assume that on January 1, 2016, Shipley Sushi purchased a building, paying $56,000 cash and signing a $101,000 note payable. The restaurant paid another $63,000 to remodel the building. Furniture and...

Q: Sasha Parker is going to set up a new business on 1

Sasha Parker is going to set up a new business on 1 January 20X1. She estimates that her first six months in business will be as follows: (i) She will put £150,000 into a bank account for the firm on...

Q: The finance director of Small Machine Parts Ltd is considering the acquisition

The finance director of Small Machine Parts Ltd is considering the acquisition of a lease of a small workshop in a warehouse complex that is being redeveloped by City Redevelopers Ltd at a steady rate...

Q: The accounting records of Central Distributors, Inc., reveal the following

The accounting records of Central Distributors, Inc., reveal the following: Requirement 1. Prepare the cash flows from operating activities section of the statement of cash flows using the indirect...

Q: The accounting records of Midwest Distributors, Inc., reveal the following

The accounting records of Midwest Distributors, Inc., reveal the following: Requirement 1. Prepare the cash flows from operating activities by section of the statement of cash flows using the indire...

Q: Cardinal Industries had the following operating results for 2018: Sales

Cardinal Industries had the following operating results for 2018: Sales = $33,106; Cost of goods sold = $23,624; Depreciation expense = $5,877; Interest expense = $2,650; Dividends paid = $1,888. At t...

Q: This is a comprehensive project evaluation problem bringing together much

This is a comprehensive project evaluation problem bringing together much of what you have learned in this and previous chapters. Suppose you have been hired as a financial consultant to Defense Elect...

Q: A proposed new project has projected sales of $175,000, costs

A proposed new project has projected sales of $175,000, costs of $93,000, and depreciation of $24,800. The tax rate is 23 percent. Calculate operating cash flow using the four different approaches des...

Q: At an output level of 45,000 units, you calculate that

At an output level of 45,000 units, you calculate that the degree of operating leverage is 2.79. If output rises to 48,000 units, what will the percentage change in operating cash flow be? Will the ne...

Q: In the previous problem, suppose fixed costs are $175,000. What

In the previous problem, suppose fixed costs are $175,000. What is the operating cash flow at 43,000 units? The degree of operating leverage?Data from Problem 11:At an output level of 45,000 units, yo...

Q: At an output level of 17,500 units, you have calculated

At an output level of 17,500 units, you have calculated that the degree of operating leverage is 3.26. The operating cash flow is $78,000 in this case. Ignoring the effect of taxes, what are fixed cos...

Q: In the previous problem, what will be the new degree

In the previous problem, what will be the new degree of operating leverage in each case?Data from Problem 14:At an output level of 17,500 units, you have calculated that the degree of operating levera...

Q: Liberty Products, Inc., is considering a new product launch. The

Liberty Products, Inc., is considering a new product launch. The firm expects to have annual operating cash flow of $5.3 million for the next eight years. The company uses a discount rate of 11 percen...

Q: Sunset Boards is a small company that manufactures and sells

Sunset Boards is a small company that manufactures and sells surfboards in Malibu. Tad Marks, the founder of the company, is in charge of the design and sale of the surfboards, but his background is i...

Q: Liberty Products, Inc., is considering a new product launch. The

Liberty Products, Inc., is considering a new product launch. The firm expects to have annual operating cash flow of $5.3 million for the next eight years. The company uses a discount rate of 11 percen...

Q: Sunset Boards is a small company that manufactures and sells

Sunset Boards is a small company that manufactures and sells surfboards in Malibu. Tad Marks, the founder of the company, is in charge of the design and sale of the surfboards, but his background is i...

Q: April made $50,000 in year 1 and $60

April made $50,000 in year 1 and $60,000 in year 2. She had the following yearly outflows: Calculate April’s operating cash flow and net cash flow for each year.

Q: Wesley Corp. is a medium-sized wholesaler of automotive parts

Wesley Corp. is a medium-sized wholesaler of automotive parts. It has 10 stockholders who have been paid a total of $1 million in cash dividends for 8 consecutive years. The board’s policy requires th...

Q: The MacCauley Company has sales of $200 million and total expenses

The MacCauley Company has sales of $200 million and total expenses (excluding depreciation) of $130 million. Straight-line depreciation on the company’s assets is $15 million, and the maximum accelera...

Q: Steber Packaging Inc. expects sales next year of $50 million

Steber Packaging Inc. expects sales next year of $50 million. Of this total, 40 percent is expected to be for cash and the balance will be on credit, payable in 30 days. Operating expenses are expecte...

Q: Look up the statement of cash flows for both Home Depot and

Look up the statement of cash flows for both Home Depot and Lowe’s using either Google Finance or Yahoo Finance. a. Compute the quality of earnings ratio for the latest three years for both firms. b....

Q: Madrano’s Wholesale Fruit Company, located in McAllen, Texas, is

Madrano’s Wholesale Fruit Company, located in McAllen, Texas, is considering the purchase of a new fleet of trucks to be used in the delivery of fruits and vegetables grown in the Rio Grande Valley of...

Q: The Minot Kit Aircraft Company of Minot, North Dakota, uses

The Minot Kit Aircraft Company of Minot, North Dakota, uses a plasma cutter to fabricate metal aircraft parts for its plane kits. The company currently is using a used cutter it purchased four years a...

Q: The Louisiana Land and Cattle Company (LL&CC) is

The Louisiana Land and Cattle Company (LL&CC) is one of the largest cattle buyers in the country. It has buyers at all the major cattle auctions throughout the U.S. Southeast who buy on the company’s...

Q: Calculate the after-tax operating cash flow NPV break-even

Calculate the after-tax operating cash flow NPV break-even point for the project described in Practice Problem 48 by using a 12-percent discount rate. Also, the asset class will be closed at the end o...

Q: Java Cafe’s tax rate is 45 percent and the appropriate discount rate

Java Cafe’s tax rate is 45 percent and the appropriate discount rate is 8 percent. It is considering another project. Each asset class consists only of the project asset and will be terminated at the...

Q: Java Cafe’s tax rate is 40 percent and the appropriate discount rate

Java Cafe’s tax rate is 40 percent and the appropriate discount rate is 12 percent. It is considering another project. Each asset class consists only of the project asset and will be terminated at the...

Q: KRZ Company has hired you to help evaluate several projects. The

KRZ Company has hired you to help evaluate several projects. The firm ’ s tax rate is 40 percent and the appropriate discount rate is 10 percent. Each asset class is small and will be terminated at th...

Q: KRZ Company has hired you to help evaluate several projects. The

KRZ Company has hired you to help evaluate several projects. The firm’s tax rate is 40 percent and the appropriate discount rate is 15 percent. Each asset class is small and will be terminated at the...

Q: KRZ Company ’ s tax rate is 40 percent and the appropriate

KRZ Company ’ s tax rate is 40 percent and the appropriate discount rate is 10 percent. It is considering a project. Each asset class is large and continues after the project terminates. KRZ is not ca...

Q: KRZ Company’s tax rate is 40 percent and the appropriate discount rate

KRZ Company’s tax rate is 40 percent and the appropriate discount rate is 8 percent. It is considering a project. Each asset class is large and continues after the project terminates. KRZ is not capit...

Q: Java Cafe’s tax rate is 45 percent and the appropriate discount rate

Java Cafe’s tax rate is 45 percent and the appropriate discount rate is 8 percent. It is considering a project. Each asset class consists only of the project asset and will be terminated at the end of...

Q: Define and differentiate between a firm’s operating cash flow (OCF)

Define and differentiate between a firm’s operating cash flow (OCF) and its free cash flow (FCF).

Q: Determine the operating cash flow (OCF) for Kleczka Inc.,

Determine the operating cash flow (OCF) for Kleczka Inc., based on the following data. (All values are in thousands of dollars.) During the year the firm had sales of $2,500, cost of goods sold totale...

Q: During the year, Xero Inc. experienced an increase in net

During the year, Xero Inc. experienced an increase in net fixed assets of $300,000 and had depreciation of $200,000. It also experienced an increase in current assets of $150,000 and an increase in ac...

Q: How does depreciation enter into the calculation of operating cash flows?

How does depreciation enter into the calculation of operating cash flows? How does the income statement format in Table 11.6 relate to Equation 4.3 for finding operating cash flow (OCF)? Table 11.6:...

Q: A firm in the third year of depreciating its only asset,

A firm in the third year of depreciating its only asset, which originally cost $180,000 and has a 5-year MACRS recovery period, has gathered the following data relative to the current yearâ€...

Q: Consider the following balance sheets and selected data from the income statement

Consider the following balance sheets and selected data from the income statement of Keith Corporation. a. Calculate the firm’s net operating profit after taxes (NOPAT) for the y...

Q: Richard and Linda Thomson operate a local lawn maintenance service for commercial

Richard and Linda Thomson operate a local lawn maintenance service for commercial and residential property. They have been using a John Deere riding mower for the past several years and believe it is...

Q: Seven years ago, after 15 years in public accounting, Stanley

Seven years ago, after 15 years in public accounting, Stanley Booker, CPA, resigned his position as manager of cost systems for Davis, Cohen, and O’Brien Public Accountants and start...

Q: Currently a firm has an operating cash flow of $42 million

Currently a firm has an operating cash flow of $42 million and there is a promising project available, which costs $30 million. There are 5 million shares outstanding with a current price of $64 per s...

Q: 1. True or False? Net working capital changes will affect

1. True or False? Net working capital changes will affect a project’s operating cash flow estimates. a. True because the project may affect levels of inventory or accounts receivable. b. True because...

Q: A project is estimated to generate sales revenue of $10 million

A project is estimated to generate sales revenue of $10 million with expenses of $9 million. No change in net working capital is expected. Marginal profits will be taxed at a 35% rate. If the project'...

Q: Why is the change in net working capital included in operating cash

Why is the change in net working capital included in operating cash flow estimates?

Q: When Jenny opened her full-service salon and day spa three

When Jenny opened her full-service salon and day spa three years ago, she knew that she would have to make some difficult choices regarding the hiring and firing of qualified professionals such as cos...

Q: You, the CPA, an audit senior at Grey & Co

You, the CPA, an audit senior at Grey & Co., Chartered Professional Accountants, are in charge of this year's audit of Plex-Fame Corporation (PFC). PFC is a rapidly expanding, diversified, and publicl...

Q: Access the financial statements of Bombardier Inc. for the years ended

Access the financial statements of Bombardier Inc. for the years ended December 31, 2015 and December 31, 2014 from the company’s website or SEDAR (www.sedar.com). Instructions: Changes in non-cash w...

Q: Access the financial statements of Bombardier Inc. for the years ended

Access the financial statements of Bombardier Inc. for the years ended December 31, 2017 and 2016, from the company's website or SEDAR (www.sedar.com). Instructions Changes in non-cash working capi...

Q: The accounting records of Perry & Associates, Inc., reveal:

The accounting records of Perry & Associates, Inc., reveal: Net Income ........................................................................................................... $25,000 Depreciation...

Q: Martinez Industries had the following operating results for 2021: Sales =

Martinez Industries had the following operating results for 2021: Sales = $38,072; Cost of goods sold = $27,168; Depreciation expense = $6,759; Interest expense = $3,050; Dividends paid = $2,170. At t...

Q: A proposed new project has projected sales of $215,000

A proposed new project has projected sales of $215,000, costs of $104,000, and depreciation of $25,300. The tax rate is 23 percent. Calculate operating cash flow using the four different approaches de...

Q: At an output level of 40,000 units, you calculate

At an output level of 40,000 units, you calculate that the degree of operating leverage is 3.19. If output rises to 44,000 units, what will the percentage change in operating cash flow be? Will the ne...

Q: In the previous problem, suppose fixed costs are $183,

In the previous problem, suppose fixed costs are $183,000. What is the operating cash flow at 38,000 units? The degree of operating leverage? Problem 11: At an output level of 40,000 units, you calcu...

Q: A proposed project has fixed costs of $76,000 per

A proposed project has fixed costs of $76,000 per year. The operating cash flow at 9,200 units is $108,700. Ignoring the effect of taxes, what is the degree of operating leverage? If units sold rise f...

Q: At an output level of 14,500 units, you have

At an output level of 14,500 units, you have calculated that the degree of operating leverage is 3.41. The operating cash flow is $81,000 in this case. Ignoring the effect of taxes, what are fixed cos...

Q: In the previous problem, what will be the new degree of

In the previous problem, what will be the new degree of operating leverage in each case? Problem 14: At an output level of 14,500 units, you have calculated that the degree of operating leverage is 3...

Q: This is a comprehensive project evaluation problem bringing together much of what

This is a comprehensive project evaluation problem bringing together much of what you have learned in this and previous chapters. Suppose you have been hired as a financial consultant to Defense Elect...

Q: Liberty Products, Inc., is considering a new product launch.

Liberty Products, Inc., is considering a new product launch. The firm expects to have annual operating cash flow of $4.9 million for the next eight years. The company uses a discount rate of 11 percen...

Q: Refer to the information in Problem 20-49 for the Davidson

Refer to the information in Problem 20-49 for the Davidson Yachts Company. Required: 1. What is the valuation of Davidson Yachts Company using the book value of equity method? 2. What is the valuatio...

Q: A company reported average total assets of $1,240,

A company reported average total assets of $1,240,000 in Year 1 and $1,510,000 in Year 2. Its net operating cash flow was $102,920 in Year 1 and $138,920 in Year 2. (1) Calculate its cash flow on tota...

Q: LearnRite.com offers e-commerce service for children’s edutainment products

LearnRite.com offers e-commerce service for children’s edutainment products and services. The word edutainment is used to describe software that combines educational and entertainmen...

Q: Gardenia Co. and Lantana Co. both operate in the same

Gardenia Co. and Lantana Co. both operate in the same industry. Gardenia began its operations in 20X1 with a $20 million initial investment in plant and equipment with an expectedlife of 10 years. Lan...

Q: You are provided the following information for the Del Campo Consulting Associates

You are provided the following information for the Del Campo Consulting Associates. Required: Assume that all supplies purchased were used in operations in the year of purchase. Rental payments pert...

Q: This case introduces you to data analysis in a very basic way

This case introduces you to data analysis in a very basic way by allowing you to quickly extract, visualize, and compare financial data over a span of ten years for two (hypothetical) publicly traded...

Q: TUFA, Inc. is a calendar-year, nonpublic company

TUFA, Inc. is a calendar-year, nonpublic company that follows U.S. GAAP. TUFA uses the cost method to account for repurchases of treasury stock. Recently, TUFA repurchased 10,000 shares of its common...

Q: Consider KaseyKraft Company from Example 22.15 in the text.

Consider KaseyKraft Company from Example 22.15 in the text. As discussed, its operating cash flow (OCF) for the year is $248,610. Because this is much lower than operating income of $733,077, KaseyKra...

Q: The accounting records of Kelly Corporation reveal the following: /

The accounting records of Kelly Corporation reveal the following: Requirements: 1. Prepare the cash flows from operating activities section of the statement of cash flows using the indirect method....

Q: The accounting records of Steven Corporation reveal the following: /

The accounting records of Steven Corporation reveal the following: Requirements: 1. Prepare the cash flows from operating activities section of the statement of cash flows using the indirect method....

Q: On January 1, 2018, Little City Bar & Grill purchased

On January 1, 2018, Little City Bar & Grill purchased a building, paying $58,000 cash and signing a $110,000 note payable. The company paid another $62,000 to remodel the building. Furniture and fix...

Q: On January 1, 2018, Black Iron Bar & Grill purchased

On January 1, 2018, Black Iron Bar & Grill purchased a building, paying $56,000 cash and signing a $101,000 note payable. The company paid another $60,000 to remodel the building. Furniture and fixtur...

Q: A company reported average total assets of $1,240,

A company reported average total assets of $1,240,000 in Year 1 and $1,510,000 in Year 2. Its net operating cash flow was $102,920 in Year 1 and $138,920 in Year 2. (1) Calculate its cash flow on tota...

Q: Diamond Foods, based in Stockton, California, is a premium

Diamond Foods, based in Stockton, California, is a premium snack food and culinary nut company with diversified operations. The company had a reputation of making bold and expensive acquisitions. Due...

Q: Consider the following 2017 data for several pharmaceutical firms ($ mill ions

Consider the following 2017 data for several pharmaceutical firms ($ mill ions). (None of the firms reported the proceeds from disposals of property, plant, and equipment.) a. Compute the operating ca...

Q: Consider the following data for several firms from 2017 ($ millions):

Consider the following data for several firms from 2017 ($ millions): a. Compute the operating cash flow to current liabilities (OCFCL) ratio for each firm. b. Compute the free cash flow for each firm...

Q: Lincoln Company owns no plant assets and reported the following income statement

Lincoln Company owns no plant assets and reported the following income statement for the current year: Additional balance sheet information about the company follows: Use the information to a. calcula...

Q: Refer to the information in Exercise 4-35. Calculate the

Refer to the information in Exercise 4-35. Calculate the net cash flow from operating activities using the direct method. Show a related cash flow for each revenue and expense. Also, compute its opera...

Q: Selected balance sheet and income statement information from Siemens, AG,

Selected balance sheet and income statement information from Siemens, AG, for 2015 through 2017 follows (€ millions). a. Compute the current ratio for each year and discuss any trend...

Q: Selected balance sheet and income statement information from Verizon Communications, Inc

Selected balance sheet and income statement information from Verizon Communications, Inc follows. a. Compute the current ratio for each year and discuss any change in liquidity. How does Verizon 's cu...

Q: Petroni Company engages in the following sequence of transactions every month:

Petroni Company engages in the following sequence of transactions every month: 1. Purchases $300 of inventory on credit. 2. Sells $300 of inventory for $420 on credit. 3. Pays other operating expenses...

Q: Wolff Company's income statement and comparative balance sheets follow. /

Wolff Company's income statement and comparative balance sheets follow. Cash dividends of $29,000 were declared and paid during 2018. Also in 2018, plant assets were purchased for cash, and bonds paya...

Q: Arctic Company's income statement and comparative balance sheets follow. /

Arctic Company's income statement and comparative balance sheets follow. During 2018, Arctic sold land for $70,000 cash that had originally cost $45,000. Arctic also purchased equipment for cash, acqu...

Q: Dair Company's income statement and comparative balance sheets follow. /

Dair Company's income statement and comparative balance sheets follow. During 2018, the company sold for $17,000 cash old equipment that had cost $36,000 and had $19,000 accumulated depreciation. Also...

Q: Rainbow Company's income statement and comparative balance sheets follow. /

Rainbow Company's income statement and comparative balance sheets follow. During 2018, the following transactions and events occurred: I. Sold long-term investments costing $57,000 for $60,000 cash. 2...

Q: The table below provides the balance sheets for Golden Enterprises, Inc

The table below provides the balance sheets for Golden Enterprises, Inc. for the fiscal years ended June 3, 2016, and May 29, 2015. Additional information: 1. Net income for the year ended June 3, 201...

Q: How is the operating cash flow to current liabilities ratio calculated?

How is the operating cash flow to current liabilities ratio calculated? Explain its use.

Q: How is the operating cash flow to capital expenditures ratio calculated?

How is the operating cash flow to capital expenditures ratio calculated? Explain its use.

Q: Indicate the effect of the following transactions on working capital requirement (

Indicate the effect of the following transactions on working capital requirement (WCR), net operating cash flow (CFOPE) , cash flow from investing activities (CFINV) , cash flow from financing activit...