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Corporate Finance, 3/e

Stephen A. Ross, Massachusetts Institute of Technology
Randolph W. Westerfield, University of Southern California
Jeffrey Jaffe, University of Pennsylvania
Gordon Roberts, York University

Accounting Statements and Cash Flow

Problems

The Agua Fria Bottling Company in 2001 had notes payable of $1,500, accounts payable of $1,400, and long-term debt of $6,000. The corresponding entries for 2002 are $1,750, $1,000, and $6,000. For assets, Agua Fria had in 2001, $1,000 in cash and marketable securities and $2,000 of inventory. The corresponding entries for 2002 are $1,200 and $1,750. Accounts receivable at the end of 2001 were $800 and $950 at the end of 2002. The firm's net plant and equipment was $9,800 in 2001 and $11,100 in 2002. Construct Agua Fria's balance sheet for 2001 and 2002.

Agua Fria Bottling Company had sales of $6,750 during 2002, costs of goods sold were $2,700, depreciation was $1,200, and had $600 of interest expense. The tax rate is 40% and all taxes are paid currently. Construct Agua Fria's income statement for the year.

In 2002, Agua Fria Bottling paid dividends of $405 and issued $605 in stock. Construct the firm's statement of cash flow for 2002 using the information from the two previous problems.

Use the 2002 financial statement information for Agua Fria, presented above, to fill in the following table:

Financial Ratios for Agua Fria Bottling Company
Short-term solvency ratios
Current ratio
Quick ratio
Activity ratios
Total asset turnover
Inventory turnover
Receivables turnover
Average collection period
Days in inventory
Financial leverage ratios
Debt ratio
Debt-to-equity ratio
Equity multiplier
Interest coverage
Profitability ratios
Net profit margin
Return on assets
Return on equity

Use the du Pont method to compute ROA and ROE for Agua Fria. Calculate the firm's sustainable growth rate.

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