78 Part 2 Fundamental Concepts in Financial Management
Balance Sheets as of December 31
2008 2007
Assets
Cash and equivalents $ 14,000 $ 13,000
Accounts receivable 30,000 25,000
Inventories 28,125 21,000
Total current assets $ 72,125 $ 59,000
Net plant and equipment 50,000 47,000
Total assets $122,125 $106,000Liabilities and Equity
Accounts payable $ 10,800 $ 9,000
Notes payable 6,700 5,150
Accruals 7,600 6,000
Total current liabilities $ 25,100 $ 20,150
Long-term bonds 15,000 15,000
Total debt $ 40,100 $ 35,150
Common stock (5,000 shares) 50,000 50,000
Retained earnings 32,025 20,850
Common equity $ 82,025 $ 70,850
Total liabilities and equity $122,125 $106,000Income Statement for Year Ending December 31, 2008
Sales $214,000
Operating costs excluding depreciation and amortization 170,000
EBITDA $ 44,000
Depreciation & amortization 5,000
EBIT $ 39,000
Interest 1,750
EBT $ 37,250
Taxes (40%) 14,900
Net income $ 22,350
Dividends paid $ 11,175a. What was net working capital for 2007 and 2008?
b. What was Bailey’s 2008 free cash flow?
c. Construct Bailey’s 2008 statement of stockholders’ equity.INCOME STATEMENT Hermann Industries is forecasting the following income
statement:Sales $8,000,000
Operating costs excluding depr. & amort. 4,400,000
EBITDA $3,600,000
Depreciation & amortization 800,000
EBIT $2,800,000
Interest 600,000
EBT $2,200,000
Taxes (40%) 880,000
Net income $1,320,000The CEO would like to see higher sales and a forecasted net income of $2,500,000. Assume
that operating costs (excluding depreciation and amortization) are 55% of sales and that
depreciation and amortization and interest expenses will increase by 10%. The tax rate,
which is 40%, will remain the same. What level of sales would generate $2,500,000 in net
income?Challenging 3-83-8
Problems 8–10Challenging
Problems 8–10