Question

F92 6 Balance Sheets 7 (in thousands of dollars) 2013 2012 9 Assets S91,450 $11,400 103,365 $38,444 $244,659 $67,165 311,824 $74,625 15,100 $85,527 34,982 $210,234 $42,436 $252,670 Cash and cash equivalents 11 Short-term investments 2 Accounts Receivable 4 Total current assets 15 Net fixed assets 16 Total assets 17 18 Liabilities and equity 19 Accounts payable 20 Accruals 21 Notes payable 22 Total current liabilities 23 Long-term debt 4 Total liabilities 25 Common stock 26 Retained Earnings 7 Total common equity 28 Total liabilities and equity 29 0a The company's 2013 sales were $455,150,000, and EBITDA was 15 percent of sales. Furthermore, depreciation $30,761 $30,477 23,109 22,656 $14,217 $59,982 77,955 154,219 100,000 $57,605 157,605 S123,896 90,000 $38,774 $128,774 $252,670 amounted to 11 percent of net fixed assets, interest charges were $8,575,000, the state-plus-federal corporate tax rate was 32 40 percent, and Watson pays 40 percent of its net income out in dividends. Given this information, construct Watson's 33 2013 income statement. 34 35 The input information required for the problem is outlined in the "Key Input Data" section below. Using this data and the balance 36 sheet above, we constructed the income statement shown below 37 38 Key Input Data for Watson Industries 39 40 Sales Revenue 1 EBITDA as a percent of sales 42 Depr. as a % of Fixed Assets 43 Tax rate 44 Interest Expense 45 Dividend Payout Ratio 46 $455,150 15% 1196 40% 40% 2013 48 Sales 49 Expenses excluding depreciation and amortization 0 EBITDA 51 Depreciation (Cumberland has no amortization charges) 52 EBIT 53 Interest Expense 54 EBT 55 Taxes (40%) 56 Net Income 2012 364,120 S321,109 $43,011 6,752 $36,259 $7,829 $28,430 $11,372 17,058 58 Common dividends 59 Addition to retained earnings 60 $6,823 $10,235 Case part 1 Case part 2

lookign to have a b c completed

Answer 1

Watsons

Income Statement

For the year ended 2013

Particular	Amount in thousands $
Sales	455,150
Expenses excluding depreciation and expense	386,878
EBITDA( 15% of sales)	68,272
Depreciation (11% of Net Fixed Assets)                         ($67,165*11%)	7,388
EBIT	60,884
Interest Expenses	8,575
EBT	52,309
Taxes @ 40%	20,924
Net Income	31,385
Common Dividend @ 40%	12,554
Addition to Retained Earning	18,831

                                                                               

b. Statement of Retained Earnings for the year 2013

Statement of Retained Earnings (In thousands of dollar)
Balance of Retained Earnings, December 31,2012	38,774
Add: Net Income, 2013	31,385
Less: Common Dividends paid,2013	12,554
Balance of Retained Earnings, December 31,2013	57,605

Statement of Cash flows (in thousands of dollar)
Operating Activities
Net Income	31,385
Adjustments:
Non Cash Adjustments:
Depreciation	7,388
Due to Changes in working capital
Increase in accounts receivable	-17,838
Increase in inventories	-3,462
Increase in accounts payable	7,652
Increase in accruals	7,821
Decrease in short-term investments	3,700
Net Cash Provided by operating Activities	36,646
Investing Activities
Cash used to acquire gross fixed assets (67,165+7,388-42,436)	-32,117
Net Cash provided by investing activities	-32,117
Financing Activities
Increase in notes payable	2,500
Increase in long-term debt	12,350
Increase in common stock	10,000
Payment of common dividends	-12,554
Net Cash provided by financing activities	12,296
Net Increase/decrease in cash	16,825
Add: Cash Balance at the beginning of the year	74,625
Cash Balance at the end of the year	91,450

C.) Calculate operating cash flow, net working capital, capital spending and free cash flow for 2013

Operating Cash Flow
OCF13	=	EBIT	+	Depreciation	-	Taxes
55,718	=	60,884	+	7,388	-	20,924
Net Working Capital
NCW13	=	Current Assets	-	Current Liabilities
166,704	=	244,659	-	77,955
NCW12	=	Current Assets	-	Current Liabilities
86,338	=	210,234	-	123,896
Investment in Net Working Capital
Change in NWC	=	NWC13	-	NWC12
80,366	=	166,704	-	86,338
Net Capital Spending
CAPEX13	=	Net Fixed Assets13	-	Net Fixed Assets12	+	Depreciation
32,117	=	67,165	-	42,436	+	7,388
Free Cash Flow
CFFA (or FCF)13	=	Operating Cash Flow	-	Net Capital Spending	-	Net Change in working capital
-56,765	=	55,718	-	32,117	-	80,366