Question

Southeast Systems has the following balance sheet and the income statement. The company had 10 million shares of common stock outstanding and its market price of the common stock was $78 at the end of 2014. Make sure the unit is in million dollars. (unit: $ in millions) Southeast Systems Balance Sheets 2013 2014 2013 2014 Cash $50 $100 Accounts payable $450 $500 Accounts receivable 600 700 Notes payable 300 400 Inventory 500 550 Long-term debt 650 650 Net fixed assets 1,000 1,000 Common equity 300 300 Retained earnings 450 500 Total Assets $2,150 $2,350 Total Liabilities & Owner’s Equity $2,150 $2,350 Income Statement 2014 Sales $2,370 Cost of goods sold 2,070 Depreciation 200 EBIT 100 Interest expenses 20 Taxable income 80 Taxes 28 Net income $52 Dividends $2 (1) What is the net cash flow from financing activity for 2014? (2) What is the total net increase in cash from 2013 to 2014?

Answer 1

Answer:

1) net cash flow from financing activities:

Dividends paid                                       ($2,000,000)

Net cash flow from financing activities ($2,000,000)

No new stocks were issued, nor any new long term debt was taken.

2) total increase in cash from 2013 to 2014 was $50,000,000

there are two ways to calculate this:

ending balance of cash account 2014 - ending balance of cash account 2013 = $100 - $50 = $50 million

cash flow from operating activities = $52 + $$50 + $100 - $100 - $50 = $54

cash flow from investing activities = $0

cash flow from financing activities ($2)

net cash increase = $50 million

Explanation:

Southeast Systems Balance Sheets

2013 2014

Cash $50 $100

Accounts receivable 600 700

Inventory 500 550

Net fixed assets 1,000 1,000

Total Assets $2,150 $2,350

Accounts payable $450 $500

Notes payable 300 400

Long-term debt 650 650

Common equity 300 300

Retained earnings 450 500

Total Liabilities & Owner’s Equity $2,150 $2,350

Income Statement 2014

Sales $2,370

Cost of goods sold 2,070

Depreciation 200

EBIT 100

Interest expenses 20

Taxable income 80

Taxes 28

Net income $52

Dividends $2