Question

Refer to the following financial statements of Quaker Oats Company.
Income Statement


Balance Sheet continue


Using Quaker’s financial statements and the analysis guidance from the chapter, prepare a fore-casted statement of cash flows for Year 12 using the following information:
Selected Forecast Data ($ millions) Year 12
Sources of cash
Assets retirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20
Uses of cash
Repayment of long-term debt. . . . . . . . . . . . . . . . . . . . . . 45
Capital expenditures—property, plant, and equipment. 300
Cash dividends on capital stock. . . . . . . . . . . . . . . . . . . . 135
Other cash expenditures. . . . . . . . . . . . . . . . . . . . . . . . . . 30
Revenue forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000

Additional assumptions for your forecasting task include:
1. Income from continuing operations in Year 12 is expected to equal the average percentage of income from continuing operations to sales for the three-year period ending June 30, Year 11.
2. The depreciation and amortization forecast for Year 12 uses the average percentage relation of depreciation and amortization to income from continuing operations for the period Year 9 through Year 11. The average is computed at 82.33%.
3. Forecasts of deferred income taxes (noncurrent portion) and other items in Year 12 reflect the past three years’ relation of deferred taxes (noncurrent) and other items to total income from continuing operations of 22.9%.
4. Provisions for restructuring charges are predicted to be zero for Year 12.
5. Days’ sales in receivables is expected to be 42 for Year 12.
6. Days’ sales in inventory of 55 and a ratio of cost of sales to sales of 0.51 are forecasted for Year 12.
7. Changes in other current assets are predicted to be equal to the average increase/decrease over the period Year 9 through Year 11 of $25.6.
8. Days’ purchases in accounts payable of 45 is forecasted for Year 12, and purchases are expected to increase in Year 12 by 12% over Year 11 purchases of $2,807.20.
9. Change in other current liabilities is predicted to be equal to the average increase/decrease over the period Year 9 through Year 11 of $24.5.
10. There are no expected discontinued operations.
11. Decreases in short-term debt are predicted at $40 million each year.
12. No cash inflows are expected from issuance of debt for spin-off and no cash effects from purchases or issuances of common and preferred stock.
13. Predicted year-end cash needs are equal to a level measured by the ratio of cash to revenues prevailing in Year 11.
14. Additions to long-term debt in Year 12 are equal to the amount needed to meet the desired year-end cashbalance.


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  • CreatedJanuary 22, 2015
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