Statement of Cash Flow

Part 1: Pearl Company has prepared the following financial statements:
Income Statement (AED in millions)
Net Sales
AED 3,648
Cost of Sale
2,469
Gross Margin
1,179
Operating expenses
641
Selling and Administrative expenses
300
Gain on sale of equipment
3
Income before taxes
231
Income taxes
91
Net Income
150
Comparative Balance Sheet (AED in millions)
December 31, 2015
December 31, 2014
Current Assets
Cash & Cash Equivalent
91
29
Short-term Investments
32
54
Accounts Receivable
605
600
Inventory
574
527
Other Assets
12
10
Total Current Assets
1,314
1,220
Property, Plant & Equipment
1,517
1,394
Less: Accumulated depreciation
654
561
Net Property, Plant & Equipment
863
833
Total Assets
2,177
2,053
Liabilities & Shareholders’ Equity
Accounts Payable
264
220
Accrued Liabilities
193
190
Income Taxes Payable
75
71
Total Current Liabilities
532
481
Bonds Payable
279
320
Long-term Bank Loans
200
200
Total Liabilities
1,011
1,001
Shareholders; Equity
Share Capital
157
155
Retained Earnings
1,009
897
Total Liabilities & Shareholders’ Equity
2,177
2,053
The Company also released the following information for 2015:
a. The Company sold some equipment for 8 million dirham. The original cost of the equipment was 12 million dirham and accumulated depreciation for this equipment was 7 million dirham. The gain on sale was 3 million dirham.
b. The Company has paid cash dividends during the year.
Required:
1. Prepare a statement of cash flows (10 marks)
2. How much free cash does the company have at the end of 2015? (2 marks)
Part 2: (8 marks)
Instructions:
A. Visit the webpage of Dubai Financial market (www.dfm.ae) and download the financial
statements of Gulfa Mineral Water Co for the year 2014 (alternatively, you can visit the
Company’s web page and download the financial statements of the company).
B. Read the financial statements and answer each of the following Questions. Show all your
workings.
Questions
1. What is the percentage change in net income for 2014 in comparison to 2013? What does this change
means?
2. What is the percentage of cost of sales for 2014?
3. What is the rate of return on average assets?
4. Calculate the rate of return on average shareholders’ equity
5. Calculate the current ratio, quick ratio, and times interest coverage for 2014
6 What is the debt ratio for 2014? How does it differ from 2013?
7. Assume the company is seeking financing from a bank. Would you recommend the bank to lend the
company the money it is asking for based on the ratios you calculated above? Explain your
recommendation.
8. Assume you have some money to invest in shares. Would you seek to become a shareholder of this
company? Explain your decision.
GGoo tthhrroouugghh tthhee attached Financial Statement of Gulfa Mineral Water Co for the Year 2014.



Price: £ 99

100% Plagiarism Free & Custom Written, Tailored to your instructions

Leave your Comments


Can't read the image? click here to refresh