The Davidson Corporation’s balance sheet and income statement are given here: Davidson Corporation: Balance Sheet as of December 31, 2005 (Millions of Dollars) Assets Liabilities and Equity Cash and...

The Davidson Corporation’s balance sheet and income statement
are given here:
Davidson Corporation: Balance Sheet as of December 31, 2005
(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, 2005
(Millions of Dollars)
Sales $6,250
Operating costs excluding depreciation and amortization 5,230
EBITDA $1,020
Depreciation and amortization 220
EBIT $ 800
Interest 180
EBT $ 620
Taxes (40%) 248
Net income $ 372
Common dividends paid $ 146
Earnings per share $ 3.72
a. All revenues were received in cash during the year and all costs except depreciation
and amortization were paid in cash during the year. What was net cash flow? How
was it different from reported accounting profit?
b. Construct the statement of retained earnings for December 31, 2005.
c. How much money has been reinvested in the firm over the years?
d. At the present time, how large a check could be written without it bouncing?
e. How much money must be paid to current creditors within the next year?