1 Review the Financial Statements Below

2 Complete the Calculation of CFFA schedule shown to the right (and the OCF/Net Income Re
3 Complete the GAAP Statement of Cash Flows below the Balance Sheet
4 In text box at right, comment on how the CFFA relates to the GAAP Statement of Cash Flow
5 Change file name to in A1_yourname.xlsx and submit on eLearning
Acme Inc. Income Statement
2013
INCOME STATEMENT
Net sales
Cost of Goods Sold Except Depr.
Depreciation and amortization
Other Operating Expenses
Total Operating Costs
Earnings before interest and taxes (EBIT)
Less interest
Pre-tax earnings
Taxes (40%)
Net Income

$
$
$
$

Dividends
Tax rate

3,432,000
2,864,000
18,900
340,000
3,222,900
209,100
62,500
146,600
58,640
87,960

$22,000
40%

Acme Inc. Balance Sheets

2013
Assets
Cash and equivalents
Short-term investments
Accounts receivable
Inventories
Total current assets
Gross fixed assets
Less: Accumulated depreciation
Net plant and equipment
Total assets
Liabilities and equity
Accounts payable
Notes payable
Accruals

$
$
$
$

9,000
48,600
351,200
715,200
1,124,000
491,000
146,200
344,800
1,468,800

145,600
200,000
136,000

Total current liabilities

Long-term bonds
Common Stock
Retained Earnings
Total Equity
Total Liabilites and Equity

Acme Inc. Statement of Cash Flows

Operating Activities
Net Income
Noncash adjustments
Depreciation and amortization
Due to changes in operating working capital
Change in accounts receivable
Change in inventories
Change in accounts payable
Change in accruals
Net cash provided by operating activities
Investing activities
Cash used to acquire fixed assets
Change in short-term investments
Net cash provided by investing activities
Financing Activities
Change in notes payable
Change in long-term debt
Payment of cash dividends
Net cash provided by financing activities
Net change in cash and equivilents
Cash and securities at beginning of the year
Cash and securities at end of the year

$
$

$
$

481,600
323,432
460,000
203,768
663,768
1,468,800

e OCF/Net Income Reconciliation). Use formulas not hard text.

atement of Cash Flow

Calculation of CFFA (per RWJ text)

2014
$

$
$
$
$

5,834,400
4,822,000
116,960
520,000
5,458,960
375,440
176,000
199,440
79,776
119,664

$11,000
40%

2014
$

$
$
$
$

17,282
20,000
632,160
1,277,360
1,946,802
1,202,950
263,160
939,790
2,886,592

324,000
505,200
284,960

EBIT
Add Depreciation & Amort.
Less Taxes
OCF
Change in WC
Net Capital Spending
Cash Flow from Assets

Reconciliation of OCF to Net Income

OCF from above
Subtract Depreciation & Amortization
Less Interest Expense
Net Income

Comment (a few bullet points) on CFFA concept versu

CFFA:
The CFFA concept represents the free cash flow ava
It indicates what the company has earned after sus
investments to the networking capital acount and a
After obtaining the CFFA, the business is now in the
utilize the available free cash flow such as paying d
off, paying down liabities, etc.
Calculation - EBIT + Dep. - Taxes

GAAP Statement of Cash Flows:

The GAAP Statement is a reconciliation of the Cash
This statement reports to equity/stockholder's.
It indicates how much cash is genereated for stockh
Interest expense is dedcuted from statement.
Statement has 3 major areas - operating activities,
actvities

$
$

$
$

1,114,160
1,000,000
460,000
312,432
772,432
2,886,592

GAAP Statement of Cash Flows:

The GAAP Statement is a reconciliation of the Cash
This statement reports to equity/stockholder's.
It indicates how much cash is genereated for stockh
Interest expense is dedcuted from statement.
Statement has 3 major areas - operating activities,
actvities

2014
$

119,664
116,960
(280,960)
(562,160)
178,400
148,960
$(279,136)

Decrease because we increased our A/R - we have used more cash

Decrease because we increased our inventories so we have used m

$(711,950)
28,600
$(683,350)

Decrease because we acquired these fixed assets - we used cash t

Decrease

$ 305,200
676,568
(11,000)
$ 970,768

Increased our cash - we have not paid them so we have more cash

$
$

8,282
9,000
17,282

Decrease because we paid out divdends

2014
$

375,440
116,960
(79,776)
412,624

190,242

711,950

(489,568)

2014
$

412,624
(116,960)
(176,000)
119,664

CFFA concept versus GAAP Statement of Cash Flows:

he free cash flow available to run the business.

has earned after sustaining the business in regards to
capital acount and after net captial spending.
usiness is now in the position to make a decision on how to
ow such as paying dividends to stockholder's, paying interst

s:
ciliation of the Cash Account changes for the year.
y/stockholder's.
enereated for stockholder's.
om statement.
operating activities, investment activities, and financing

s:
ciliation of the Cash Account changes for the year.
y/stockholder's.
enereated for stockholder's.
om statement.
operating activities, investment activities, and financing

ave used more cash to sell more; we have not collected on money owed to us.
s so we have used more cash to produce more.

ets - we used cash to purchase such assets

we have more cash

1 Review the Financial Statements Below

2 Complete the Calculation of CFFA schedule shown to the right (and the OCF/Net Income Re
3 Complete the GAAP Statement of Cash Flows below the Balance Sheet
4 In text box at right, comment on how the CFFA relates to the GAAP Statement of Cash Flow
5 Change file name to in A1_yourname.xlsx and submit on eLearning
Acme Inc. Income Statement
2013
INCOME STATEMENT
Net sales
Cost of Goods Sold Except Depr.
Depreciation and amortization
Other Operating Expenses
Total Operating Costs
Earnings before interest and taxes (EBIT)
Less interest
Pre-tax earnings
Taxes (40%)
Net Income

$
$
$
$

Dividends
Tax rate

3,432,000
2,864,000
18,900
340,000
3,222,900
209,100
62,500
146,600
58,640
87,960

$22,000
40%

Acme Inc. Balance Sheets

2013
Assets
Cash and equivalents
Short-term investments
Accounts receivable
Inventories
Total current assets
Gross fixed assets
Less: Accumulated depreciation
Net plant and equipment
Total assets
Liabilities and equity
Accounts payable
Notes payable
Accruals

$
$
$
$

9,000
48,600
351,200
715,200
1,124,000
491,000
146,200
344,800
1,468,800

145,600
200,000
136,000

Total current liabilities

Long-term bonds
Common Stock
Retained Earnings
Total Equity
Total Liabilites and Equity

Acme Inc. Statement of Cash Flows

Operating Activities
Net Income
Noncash adjustments
Depreciation and amortization
Due to changes in operating working capital
Change in accounts receivable
Change in inventories
Change in accounts payable
Change in accruals
Net cash provided by operating activities
Investing activities
Cash used to acquire fixed assets
Change in short-term investments
Net cash provided by investing activities
Financing Activities
Change in notes payable
Change in long-term debt
Payment of cash dividends
Net cash provided by financing activities
Net change in cash and equivilents
Cash and securities at beginning of the year
Cash and securities at end of the year

$
$

$
$

481,600
323,432
460,000
203,768
663,768
1,468,800

e OCF/Net Income Reconciliation). Use formulas not hard text.

atement of Cash Flow

Calculation of CFFA (per RWJ text)

2014
$

$
$
$
$

5,834,400
4,822,000
116,960
520,000
5,458,960
375,440
176,000
199,440
79,776
119,664

$11,000
40%

2014
$

$
$
$
$

17,282
20,000
632,160
1,277,360
1,946,802
1,202,950
263,160
939,790
2,886,592

324,000
505,200
284,960

EBIT
Add Depreciation & Amort.
Less Taxes
OCF
Change in WC
Net Capital Spending
Cash Flow from Assets

Reconciliation of OCF to Net Income

OCF from above
Subtract Depreciation & Amortization
Less Interest Expense
Net Income

Comment (a few bullet points) on CFFA concept versu

$
$

$
$

1,114,160
1,000,000
460,000
312,432
772,432
2,886,592

2014

Error

2014

2014
$

CFFA concept versus GAAP Statement of Cash Flows: