Chapter 3 Financial Statements, Cash Flow, and Taxes 79
FINANCIAL STATEMENTS The Davidson Corporation’s balance sheet and income state-
ment are provided here.
Davidson Corporation: Balance Sheet as of December 31, 2008
(Millions of Dollars)
Assets Liabilities and Equity
Cash and equivalents $ 15 Accounts payable $ 120
Accounts receivable 515 Notes payable 220
Inventories 880 Accruals 280
Total current assets $1,410 Total current liabilities $ 620
Net plant and equipment 2,590 Long-term bonds 1,520
Total debt $ 2,140
Common stock (100 million shares) 260
Retained earnings 1,600
Common equity $ 1,860
Total assets $4,000 Total liabilities and equity $ 4,000
Davidson Corporation: Income Statement
For Year Ending December 31, 2008 (Millions of Dollars)
Sales $6,250
Operating costs excluding depreciation and amortization 5,230
EBITDA $1,020
Depreciation & amortization 220
EBIT $ 800
Interest 180
EBT $ 620
Taxes (40%) 248
Net income $ 372
Common dividends paid $ 146
Earnings per share $ 3.72
a. Construct the statement of stockholders’ equity for December 31, 2008.
b. How much money has been reinvested in the firm over the years?
c. At the present time, how large a check could be written without it bouncing?
d. How much money must be paid to current creditors within the next year?
FREE CASH FLOW Financial information for Powell Panther Corporation is shown here.
Powell Panther Corporation: Income Statements
For Year Ending December 31 (Millions of Dollars)
2008 2007
Sales $1,200.0 $1,000.0
Operating costs excluding depreciation and amortization 1,020.0 850.0
EBITDA $ 180.0 $ 150.0
Depreciation & amortization 30.0 25.0
Earnings before interest and taxes $ 150.0 $ 125.0
Interest 21.7 20.2
Earnings before taxes $ 128.3 $ 104.8
Taxes (40%) 51.3 41.9
Net income $ 77.0 $ 62.9
Common dividends $ 60.5 $ 46.4
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