41) The following information is available for two different retailers, both of whom began business this year:
Cash flows from: (in 000’s)
New Co. A
New Co. B
Operating Activities
$ (50,000)
$ 40,000
Investing Activities
20,000
(90,000)
Financing Activities
40,000
60,000
Net increase in cash
$10,000
Cash balance, Jan. 1
0
Cash balance, Dec. 31
$ 10,000
Put an "X" in either the Company A or Company B column:
Co. A
Co. B
1.
Which company appears to be purchasing long-term assets?
2.
Which company would you expect to have future financial troubles?
3.
Which company would you expect to have the greater depreciation expense?
42) Jo Lynn Lee is learning about investing. She has learned that Warren Buffet uses free cash flow as one of the tools to analyze companies. Explain to Jo Lynn why Warren Buffet and other investors believe that free cash flow is a valuable tool to use when analyzing companies.
43) Why would a company cut its cash dividends? Is it ethical to cut the dividends?
44) Why is evaluating a company’s cash flow important for analysts?
45) Use the August transactions and financial statements for Team Shirts in Chapter 8 of your textbook to answer these questions:
If Team Shirts had used the indirect method of preparing the statement of cash flows, would total cash from operating activities be greater?
If Team Shirts had used the indirect method of preparing the statement of cash flows, would the net increase in cash for the month be greater?
Did cash increase or decrease in August?
4.
Which activity, operating, investing, or financing, provided the greatest amount of cash in August?
5.
Did Team Shirts pay a cash dividend in August?
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