Consider the following balance sheets and selected data from the income statement of Keith Corporation, then prepare answers for the accompanying questions:
Keith Corporation Balance Sheets
|
Assets
|
12/31/2009
|
12/31/2008
|
|
Cash
|
$ 1,500
|
$ 1,000
|
|
Marketable securities
|
1,800
|
1,200
|
|
Accounts receivable
|
2,000
|
1,899
|
|
Inventories
|
2,900
|
2,800
|
|
Total current assets
|
$ 8,200
|
$ 6,800
|
|
Gross fixed assets
|
$ 29,500
|
$ 28,100
|
|
Less: Accumulated depreciation
|
14,700
|
13,100
|
|
Net fixed assets
|
$ 14,800
|
$ 15,100
|
|
Total assets
|
$ 23,000
|
$ 21,800
|
Liabilities and Stockholder's Equity
|
Accounts payable
|
$ 1,600
|
$ 1,500
|
|
Notes payable
|
2,800
|
2,200
|
|
Accruals
|
200
|
300
|
|
Total current liabilities
|
$ 4,600
|
$ 4,000
|
|
Long-term debt
|
5,000
|
5,000
|
|
Total liabilities
|
$ 9,600
|
$ 9,000
|
|
Common stock
|
$ 10,000
|
$ 10,000
|
|
Retained earnings
|
3,400
|
2,800
|
|
Total stockholder's equity
|
$ 13,400
|
$ 12,800
|
|
Total liabilities and owners equity
|
$ 23,000
|
$ 21,800
|
Keith Corporation Income Statement Data (2109)
|
Depreciation expense
|
$ 1,600
|
|
Earnings before interest and taxes
|
2,700
|
|
Interest expense
|
367
|
|
Net profits after taxes
|
1,400
|
|
Tax rate
|
40%
|
a. Calculate the firm's accounting cash flow from operations for the year ended December 31, 2009, using: Cash flow from operations = net profits after tax + depreciation
b. Calculate the firm's net operating profit after taxes (NOPAT) for the year ended December 31, 2009, using Equation: NOPAT = EBIT x (1 - T)
c. Calculate the firm's operating cash flow (OCF) for the year ended December 31, 2009, using Equation: OCF = NOPAT + Depreciation
d. Calculate the firm's free cash flow (FCF) for the year ended December 31, 2009, using the Equation in P1, above.
e. Interpret, compare, and contrast your cash flow estimates in parts a, c, and d.