Essay about Chapter 3

1596 Words Jan 10th, 2014 7 Pages
CHAPTER 3

BA II Plus 2nd .

9 Enter Financial Statements, Cash Flow, and Taxes

Balance sheet

Income statement

Accounting income vs. cash flow

MVA and EVA

Federal tax system

The Annual Report

Balance sheet – provides a snapshot of a firm’s financial position at one point in time.

Income statement – summarizes a firm’s revenues and expenses over a given period of time.

Statement of retained earnings – shows how much of the firm’s earnings were retained, rather than paid out as dividends.

Statement of cash flows – reports the impact of a firm’s activities on cash flows over a given period of time.

Balance Sheet:
…show more content…
& Amort. 116,960 18,900

EBIT (130.948) 190,428

Interest Exp. 136,012 43,828

EBT (266,960) 146,600

Taxes (106,784) 58,640

Net income (160,176) 87,960

Other data

No. of shares 100,000 100,000

EPS -1.602 0.88

DPS 0.11 0.22

Stock price 2.25 8.50

Lease pmts 40,000 40,000

1. Little Books Inc. recently reported net income of $3 million. Its operating income
Income Statement (EBIT) was $6 million, and the company pays a 40 percent tax rate. What was the company's interest expense for the year? [Hint: Divide $3 million by (1 - T) = 0.6 to find taxable income.]

2. Pearson Brothers recently reported an EBITDA of $7.5 million and $1.8 million
Income statement of net income. The company has $2.0 million of interest expense and the corporate tax rate is 40 percent. What was the company's depreciation and amortization expense?

Statement of Retained Earnings (2011)

Balance of Retained Earnings 12/31/12 $203,768 Add: Net Income 2013 (160,176)

Less: Dividends paid (11,000)

Balance of Retained Earnings 12/31/13 32,592

3. In its most recent financial statements, Newhouse Inc. reported $50 million of net Statement of

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