Part One
During the current year, a firm had sales of 1,500,000; cost of goods sold of 1,245,000 selling and administration expenses of 187,500; depreciation of 217,500; and, interest expense of 97,500. The tax rate is 35%. (Ignore any tax loss carry back or carry forward provisions.)
1] What is the corporation’s net income for the year? If it is negative, do not calculate taxes.
2] What is the corporation’s operating cash flow for the year?
3] Please explain your results in (1) and (2).
Part Two
Suppose the corporation paid out 35,000 in cash dividends; is this possible?
Part Three
If the corporation’s spending on net fixed assets and net working capital was zero, and if no new stock was issued during the year, what do you know about the firm’s long-term debt account? You are to assume that the corporation will do the $35,000 dividend. Express your answer as a number.