Show all work below. 1. What is: a) the Operating Cash Flow for 2016? b) the cha
ID: 2539341 • Letter: S
Question
Show all work below.
1. What is:
a) the Operating Cash Flow for 2016?
b) the change in Net Working Capital for 2016?
c) Capital Spending for 2016?
d) the Free Cash Flow (or Cash Flow from Assets) for 2016?
2. Calculate the financial ratio for Garrison Inc. for ‘16. The industry standard is provided in brackets. Also please comment on how Garrison Inc. fairs to the industry average.
a) Quick Ratio (Acid Test) {Industry average 1.3}
b) Day Sales in Receivables (also known as Average Collection Period) {Industry average 42}
c)Profit Margin {Industry average 5%}
d) Return on Common Equity (ROE) {Industry average 17%}
n Inc. Income Statements for year ending December 31 (thousands of dollans 2016 201 1,500.0 1,200 1,275.0 1,020 rating costs excluding depreciation preciation 36.0 189.0 23.3 165.7 66.3 99.4 s before interest& taxes (EBIT) 150 21 128 51 ess Interest s before taxes axes (40%) t Income available to common stockholders n dividends 69.0Explanation / Answer
1-
operating cash flow for 2016
EBIT
189
add depreciation
36
less taxes
66.3
operating cash flow for 2016
158.7
change in net working capital 2016
Additions to NWC = Ending NWC - Beginning NWC
155-185
-30
ending new working capital
ending current assets-ending current liabilities
464-309
155
beginning new working capital
beginning current assets-beginning current liabilities
432-247
185
capital spending 2016
ending net fixed assets+ depreciation-beginning net fixed assets
360+36-300
96
free cash flow
operating cash flow-change in working capital-capital spending
158.7-(-30)-96
92.7
2-
Company
Industry
1-
Quick ratio
quick assets/current liabilities
0.77
1.3
Quick asset =total current assets-inventory
464.4-225
239.4
current liabilities
309
2-
day sales in receivables
365/accounts receivable turnover ratio
365/7.407
49.27771
accounts receivable turnover ratio
sales/average accounts receivables
7.407407
average accounts receivables
(225+180)/2
202.5
sales
1500
3-
profit margin
net income/sales
6.63%
it is better than industry average as it is more than industry average of 5%
net income
99.4
sales
1500
4-
return on common equity
net income/average common equity
31.04%
it is better than industry average as it is more than industry average of 17%
net income
99.4
average common equity
(335.4+305)/2
320.2
1-
operating cash flow for 2016
EBIT
189
add depreciation
36
less taxes
66.3
operating cash flow for 2016
158.7
change in net working capital 2016
Additions to NWC = Ending NWC - Beginning NWC
155-185
-30
ending new working capital
ending current assets-ending current liabilities
464-309
155
beginning new working capital
beginning current assets-beginning current liabilities
432-247
185
capital spending 2016
ending net fixed assets+ depreciation-beginning net fixed assets
360+36-300
96
free cash flow
operating cash flow-change in working capital-capital spending
158.7-(-30)-96
92.7
2-
Company
Industry
1-
Quick ratio
quick assets/current liabilities
0.77
1.3
Quick asset =total current assets-inventory
464.4-225
239.4
current liabilities
309
2-
day sales in receivables
365/accounts receivable turnover ratio
365/7.407
49.27771
accounts receivable turnover ratio
sales/average accounts receivables
7.407407
average accounts receivables
(225+180)/2
202.5
sales
1500
3-
profit margin
net income/sales
6.63%
it is better than industry average as it is more than industry average of 5%
net income
99.4
sales
1500
4-
return on common equity
net income/average common equity
31.04%
it is better than industry average as it is more than industry average of 17%
net income
99.4
average common equity
(335.4+305)/2
320.2