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You are researching Time Manufacturing and have found the following accounting statement of cash flows for the

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You are researching Time Manufacturing and have found the following accounting statement of cash flows for the most recent year. You also know that the company paid $81 million in current taxes and had an interest expense of $38 million. Use the accounting statement of cash flows to construct the financial statement of cash flows.

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TIME MANUFACTURING Statement of Cash Flows ($ in millions) Operations Net income 187 Depreciation 74 Deferred taxes 11 Changes in assets and liabilities Accounts receivable -12 Inventories 15 Accounts payable Accrued expenses 11 -6 Other 2 Total cash flow from operations Investing activities $282 -$ 194 Acquisition of fixed assets Sale of fixed assets Total cash flow from investing activities 19 Financing activities Retirement of long-term debt Proceeds from long-term debt sales $145 110 Dividends -67 Repurchase of stock -32 Proceeds from new stock issue 39 Total cash flow from financing activities -$ 95 Change in cash (on balance sheet) $ 12

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We will begin by calculating the operating cash flow First we need the EBIT which can be calculated ...View the full answer


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Corporate Finance

Corporate Finance

ISBN: 978-1259918940

12th edition

Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford Jordan

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Depreciation of non-current assets is the process of allocating the cost of the asset over its useful life. The cost of the asset includes the purchase price, any additional costs incurred to bring the asset to its current condition and location, and any other costs that are directly attributable to the asset. The useful life of the asset is the period over which the asset is expected to be used by the company. To calculate the depreciation, companies use different methods such as straight-line, declining-balance, sum-of-the-years\'-digits, units-of-production, and group depreciation. The chosen method will depend on the type of asset, the company\'s accounting policies, and the accounting standards that are applicable. The straight-line method allocates an equal amount of the asset\'s cost over its useful life, while the declining-balance method calculates depreciation at a fixed rate, typically double the straight-line rate, but the amount of depreciation decreases over time. The sum-of-the-years\'-digits method is similar to the declining-balance method, but the rate of depreciation is calculated using a fraction that is based on the useful life of the asset. It\'s important to note that the depreciation expense will be recorded on the company\'s income statement and the accumulated depreciation will be recorded on the company\'s balance sheet. This will decrease the value of the asset on the balance sheet over time.

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