In 2024, ABC Corporation underwent significant financial activity, including issuing new shares with a book value...

  

Transcribed Image Text:

In 2024, ABC Corporation underwent significant financial activity, including issuing new shares with a book value of $500 to raise additional capital. Prior to the issuance of new equity, the company started the year with an initial balance of $500 for common stock and paid-in surplus. During the year, the company effectively managed its long-term debt by reducing it from $10,292 to $4,700. In terms of financial performance, the company achieved cumulative retained earnings of $10,000 in 2024. Operating results were robust, with sales amounting to $38,900 and a corresponding cost of goods sold of $24,600. The company also incurred $1,700 in depreciation expenses and $1,400 in interest expenses. The tax rate for 2024 stood at 34%. Additionally, the company distributed dividends totalling $3,000. Despite a slight decrease in net fixed assets from $14,300 to $13,900, the company experienced growth in current assets, which increased from $8,700 to $9,200. However, current liabilities rose from $6,600 to $7,400 by the end of the year. These financial activities demonstrate ABC Corporation's efforts to raise capital, manage debt, and achieve growth in its retained earnings and current assets. 1. Please complete the income statement for ABC Corporation and include it in your answer sheets. (5 Marks) Sales Cost of goods sold Depreciation expense Earnings before interest and taxes Interest paid Taxable income Taxes Net Income Dividends ABC Corporation 2024 Income Statement ? ? ? ? ? ? ? ? ? ? Addition to retained earnings 2. What should be the total equity for the company in 2024? Please note that the total equity is calculated by summing the cumulative retained earnings with the common stock and paid-in surplus. (1 marks) 3. Please complete the balance sheets for ABC Corporation and include them in your answer sheets. (7 Marks) ABC Corporation 2023 and 2024 Balance Sheets 2023 2024 2023 2024 Current Assets ? ? Current Liabilities ? ? ABC Corporation 2023 and 2024 Balance Sheets 2023 2024 2023 2024 Current Assets ? ? Current Liabilities ? ? Fixed Assets ? ? Long-term Debt ? ? Equity ? ? Total Assets ? ? Total Liabilities and Equity ? ? 1 4. Calculate the 2024 operating cash flow (OCF). (1 mark) 5. Calculate the 2024 net capital spending (NCS). (1 mark) 6. Calculate the 2024 change in net working capital (ANWC). (1 mark) 7. Calculate the cash flow from assets for 2024 using the OCF, NCS and ANWC for 2024. (1 mark) 8. Calculate the 2024 cash flow to shareholders (CF to S) and cash flow to creditors (CF to C), and verify if the cash flow identity holds. (3 marks) 9. Return on equity (ROE) can be decomposed into three component ratios of the DuPont Identity. Calculate the three component ratios in 2024 and hence the ROE in 2024. (2 marks) In 2024, ABC Corporation underwent significant financial activity, including issuing new shares with a book value of $500 to raise additional capital. Prior to the issuance of new equity, the company started the year with an initial balance of $500 for common stock and paid-in surplus. During the year, the company effectively managed its long-term debt by reducing it from $10,292 to $4,700. In terms of financial performance, the company achieved cumulative retained earnings of $10,000 in 2024. Operating results were robust, with sales amounting to $38,900 and a corresponding cost of goods sold of $24,600. The company also incurred $1,700 in depreciation expenses and $1,400 in interest expenses. The tax rate for 2024 stood at 34%. Additionally, the company distributed dividends totalling $3,000. Despite a slight decrease in net fixed assets from $14,300 to $13,900, the company experienced growth in current assets, which increased from $8,700 to $9,200. However, current liabilities rose from $6,600 to $7,400 by the end of the year. These financial activities demonstrate ABC Corporation's efforts to raise capital, manage debt, and achieve growth in its retained earnings and current assets. 1. Please complete the income statement for ABC Corporation and include it in your answer sheets. (5 Marks) Sales Cost of goods sold Depreciation expense Earnings before interest and taxes Interest paid Taxable income Taxes Net Income Dividends ABC Corporation 2024 Income Statement ? ? ? ? ? ? ? ? ? ? Addition to retained earnings 2. What should be the total equity for the company in 2024? Please note that the total equity is calculated by summing the cumulative retained earnings with the common stock and paid-in surplus. (1 marks) 3. Please complete the balance sheets for ABC Corporation and include them in your answer sheets. (7 Marks) ABC Corporation 2023 and 2024 Balance Sheets 2023 2024 2023 2024 Current Assets ? ? Current Liabilities ? ? ABC Corporation 2023 and 2024 Balance Sheets 2023 2024 2023 2024 Current Assets ? ? Current Liabilities ? ? Fixed Assets ? ? Long-term Debt ? ? Equity ? ? Total Assets ? ? Total Liabilities and Equity ? ? 1 4. Calculate the 2024 operating cash flow (OCF). (1 mark) 5. Calculate the 2024 net capital spending (NCS). (1 mark) 6. Calculate the 2024 change in net working capital (ANWC). (1 mark) 7. Calculate the cash flow from assets for 2024 using the OCF, NCS and ANWC for 2024. (1 mark) 8. Calculate the 2024 cash flow to shareholders (CF to S) and cash flow to creditors (CF to C), and verify if the cash flow identity holds. (3 marks) 9. Return on equity (ROE) can be decomposed into three component ratios of the DuPont Identity. Calculate the three component ratios in 2024 and hence the ROE in 2024. (2 marks)