- 8 Analyzing Accounting Data For Managerial Decisions Accounting Data Is Used To Generate A Firm S Financial Statements 1 (48.15 KiB) Viewed 31 times
- 8 Analyzing Accounting Data For Managerial Decisions Accounting Data Is Used To Generate A Firm S Financial Statements 2 (36.87 KiB) Viewed 31 times
8. Analyzing accounting data for managerial decisions Accounting data is used to generate a firm's financial statements, but a firm's Intrinsic value is based on its free cash flows, which are the cash flows available for distribution to the
company's investors after the
company has made all of the investments necessary to sustain its ongoing operations Consider the following case: 36H Corp. recently hired Jeffery. His immediate mandate was to analyze the
company. He has to submit a report on the
company's operational efficiency and estimate its potential investment in working capital. He has the income
statement from last year and the following Information from the
company's financial reports as well as some industry averages Last year, J&H Corp. reported a book value of $450,000 in current assets, of which 10% is cash, 12% is short-term investments, and the rest is accounts receivable and inventory. • The
company reported $382,500 of current liabilities including accounts payable and accruals. Interestingly, the
company had no notes payable outstanding, and there were no changes in the
company's accounts payable during the year • The
company, however, invested heavily in plant and equipment to support its operations. It reported a book value of $720,000 for its operating long-term assets last year, Income
Statement for the Year Ended on December 31 JBH Corp. Industry Average Net soles $43,000,000 $53,750,000 Operating costs, except depreciation and amortization 34,400,000 43,000,000 Depreciation and amortization 1,720,000 2,150,000 Total operating costs 36,120,000 45,150,000 Operating income (or EBIT) $6,880,000 $8,600,000 Aa24 0 lo dtv A 2
06: Assignment - Accounting for Financial Management Net sales Operating costs, except depreciation and amortization Depreciation and amortization Total operating costs Operating income (or EBIT) Less: Interest expense Earnings before taxes (EBT) Less: Taxes (40%) $43,000,000 34,400,000 1,720,000 36,120,000 $6,880,000 688,000 $6,192,000 2,476,800 $3,715,200 $53,750,000 43,000,000 2,150,000 45,150,000 $8,600,000 1,290,000 $7,310,000 2,924,000 $4,386,000 Net Income Based on the information given to him, Jeffery submits a report on January 1 with some important calculations for management to use, both for analysis and to devise an action plan. Complete the following statements in his report. If your answer is negative, use the ininus sign.
Statement #1: 3BH Corp. NOPAT IS
Statement #2: The
company has
Statement #31 H Corp, has
Statement #4: H Corp.'s total in operating long-term assets, is equal to 3 $2,220,120, which is lower than the industry average of $2,142,000 $450,000 in operating assets and $362,500 in operating liabilities In noncash charges, and a net cash flow of which consists of its net operating working capital and its total investment