1. The statement of cash flows for Baldwin Company shows what happens in the Cash account during the year. It can be seen as a summary of the sources and uses of cash (sources of cash are added, uses of cash are subtracted). Please answer which of the following is true if Baldwin’s accounts payable goes down:
It is a use of cash, and will be shown in the financing section as a subtraction.
It is a use of cash, and will be shown in the operating section as a subtraction.
It is a source of cash, and will be shown in the operating section as an addition.
It is a source of cash and will be shown in the financing section as an addition.
2. It is January 2nd. Senior management of Baldwin meets to determine their investment plan for the year. They decide to fully fund a plant and equipment purchase by issuing 50,000 shares of stock plus a new bond issue. The CFO happily notes this will raise their Leverage (=assets/equity) to a new target of 2.7. Assume the stock can be issued at yesterday’s stock price ($41.76). Which of the following statements are true? Check all that apply.
The Baldwin bond issue will be $3,549,600
Total Assets will rise to $233,356,000
Long term debt will increase from $83,635,560 to $85,723,560
Baldwin will issue stock totaling $2,088,000
Total investment for Baldwin will be $5,637,600
The Baldwin Working Capital will be unchanged at $17,469