A comparative balance sheet and an income statement for Rowan Company are given below:

Rowan also provided the following information:

The company sold equipment with an original cost of $$16$ million and accumulated depreciation of $$9$ million. The cash proceeds

from the sale were $$11$ million. The gain on the sale was $$4$ million.

The company did not issue any new bonds during the year.

The company paid a cash dividend during the year.

The company did not complete any common stock transactions during the year.

Required:

Using the indirect method, prepare a statement of cash flows for the year.

Calculate the free cash flow for the year.

To help Rowan assess its liquidity at the end of the year, calculate the following:

a$.$ Current ratio

b$.$ Acid$-$test $($quick$)$ ratio

To help Rowan assess its asset management, calculate the following:

a$.$ Average collection period $($assuming all sales are on account$)$

b$.$ Average sale period

To help Rowan assess its debt management, calculate the following:

a$.$ Debt$-$to$-$equity ratio at the end of the year

b$.$ Equity multiplier

To help Rowan assess its profitability, calculate the following:

a$.$ Net profit margin percentage

b$.$ Return on equity

To help Rowan assess its market performance, calculate the following $($assume the par value of the company's common stock is $$10$

per share$)$:

a$.$ Earnings per share

b$.$ Dividend payout ratioA comparative balance sheet and an income statement for Rowan Company are given below:

Rowan Company Comparative Balance Sheet $($dollars in millions$)$

Ending Balance Beginning Balance

Assets

Current assets:

Cash and cash equivalents $ $70$ $ $91$

Accounts receivable $536572$

Inventory $620580$

Total current assets $1,2261,243$

Property, plant, and equipment $1,7191,656$

Less accumulated depreciation $640480$

Net property, plant, and equipment $1,0791,176$

Total assets $ $2,305$ $ $2,419$

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable $ $205$ $ $180$

Accrued liabilities $94105$

Income taxes payable $7288$

Total current liabilities $371373$

Bonds payable $180310$

Total liabilities $551683$

Stockholders' equity:

Common stock $800800$

Retained earnings $954936$

Total stockholders' equity $1,7541,736$

Total liabilities and stockholders' equity $ $2,305$ $ $2,419$

Rowan Company Income Statement For the Year Ended December $31($dollars in millions$)$

Sales $ $4,350$

Cost of goods sold $3,470$

Gross margin $880$

Selling and administrative expenses $820$

Net operating income $60$

Nonoperating items: Gain on sale of equipment $4$

Income before taxes $64$

Income taxes $22$

Net income $ $42$

Rowan also provided the following information:

The company sold equipment with an original cost of $$16$ million and accumulated depreciation of $$9$ million. The cash proceeds from the sale were $$11$ million. The gain on the sale was $$4$ million.

The company did not issue any new bonds during the year.

The company paid a cash dividend during the year.

The company did not complete any common stock transactions during the year.

Required:

Using the indirect method, prepare a statement of cash flows for the year.

Calculate the free cash flow for the year.

To help Rowan assess its liquidity at the end of the year, calculate the following:

Current ratio

Acid$-$test $($quick$)$ ratio

To help Rowan assess its asset management, calculate the following:

Average collection period $($assuming all sales are on account$)$

Average sale period

To help Rowan assess its debt management, calculate the following:

Debt$-$to$-$equity ratio at the end of the year

Equity multiplier

To help Rowan assess its profitability, calculate the following:

Net profit margin percentage

Return on equity

To help Rowan assess its market performance, calculate the following $($assume the par value of the company$$s common stock is $$10$ per share$)$:

Earnings per share

Dividend payout ratio