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FIN 534 FINANCIAL MANAGEMENT Week 2 Homework Set 1 FREE CASH FLOWS, FINANCIAL RATIOS
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Homework Set 1 Ma. Cesarlita G. Josol Strayer University FIN 534 Financial Management Dr. Ronal Lentz, CPA FIN 534 – HOMEWORK SET 1 2 Homework Set 1 Calculating of the free cash flows and financial ratios asses the financial strength of a firm. The purpose of management is wealth maximization of shareholder’s wealth hence determining how a business operates and sustains itself is critical. Financial statements and financial ratios are essential data for managers in their strategy to reach the goal of wealth maximization. What is the Free Cash Flow for 2013? Income Statements and Balance Sheet Balance Sheet 2013 2012 Cash $ 9,000 $ 7,282 Short-term investments 48,600 20,000 Accounts receivable 351,200 632,160 Inventories 715,200 1,287,360 Total current assets $ 1,124,000 $ 1,946,802 Gross fixed assets 491,000 1,202,950 Less: Accumulated depreciation 146,200 263,160 Net fixed assets 344,800 939,790 Total assets $ 1,468,800 $ 2,886,592 Liabilities and Equity Accounts payable $ 145,600 $ 324,000 Notes payable 200,000 720,000 Accruals 136,000 284,960 Total current liabilities $ 481,600 $ 1,328,960 Long-term debt 323,432 1,000,000 Common stocks (100,000 shares) 460,000 460,000 Retained earnings 203,768 97,632 Total equity $ 663,768 $ 557,632 Total liabilities and equity $ 1,468,800 $ 2,886,592 FIN 534 – HOMEWORK SET 1 3 Income Statements 2013 2012 Sales 3,432,000 5,834,400 Cost of goods sold except depreciation 2,864,000 4,980,000 Depreciation and Amortization 18,900 1

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