Ratios

10 MCQs on financial analysis

Financial statement analysis

1. Based on the following financial information, which best describes the company’s liquidity and quality of its current assets over the past three years?

20Y1

20Y2

20Y3

Current ratio

1.4

Quick ratio

0.4

0.5

Working capital (000)

$ 66

$ 97

$ 135

Accounts receivable days on hand

Inventory days on hand

123

126

108

Liquidity is trending downward as shown by the declining current and quick ratios. The ratios would be even lower were it not for the 10-day slowdown of the collection period.

While the company’s quick ratio and working capital indicate its liquidity is improving, a substantial part of the improvement is the direct result of the 10-day slowdown in the collection period. Until we know what caused the slowdown, the company’s liquidity is unclear and its asset quality may actually be deteriorating.

Liquidity has doubled as shown by the doubling of working capital. In fact, it may have more than doubled because inventory is reported at a lower value due to a 15-day shortening of the holding period.

Liquidity is declining as shown by the steady increase in the company’s reliance on inventory to cover current liabilities. This, coupled with the decreasing amount of inventory due to a 15-day shortening of the holding period, indicates even less liquidity.

Question 2: What is the trend in the EBITDA-to-total-debt-service and Funded debt-to-EBITDA ratios for the years 20Y2 and 20Y3?

Company

Revolutionary Designs, Inc.

The current portion of a company’s balance sheets for the past three years are as follows:

20Y1

20Y2

20Y3

Cash

$ 100

$ 123

$ 66

Accounts receivable

240

303

376

Inventory

417

461

547

Other current assets

117

107

Total current assets

$ 874

$ 957

$ 1,096

Notes payable

$ 0

$ 5

$ 101

Current portion LTD

Accounts payable

148

204

244

Accrued expenses

Other current liabilities

Total current liabilities

$ 319

$ 368

$ 527

question 3:Which of the following best describes the company’s liquidity over the past three years?

EBITDA-to-Total-debt-service increased from 0.3 to 0.4 and Funded-debt-to-EBITDA decreased from 3.6 to 4.1.

EBITDA-to-Total-debt-service increased slightly from 0.2 to 0.3, but Funded-debt-to-EBITDA weakened from 4.4 to 3.7.

EBITDA-to-Total-debt-service increased from 2.8 to 3.1 and Funded-debt-to-EBITDA decreased from 4.4 to 3.7.

EBITDA-to-Total-debt-service strengthened, increasing from 2.8 to 3.1, but Funded-debt-to-EBITDA weakened, decreasing from 3.6 to 3.1.

Liquidity indicators showed improvement as evidenced by lower current and quick ratios in 20Y3.

Liquidity indicators deteriorated in each of the three years as evidenced by the consecutive increases in both the current and quick ratios.

Liquidity indicators were relatively stable from 20Y1 to 20Y2 but then deteriorated in 20Y3 when both the current and quick ratios declined.

Liquidity indicators were mixed with the quick ratio improving and the current ratio declining over the three year period.

Three years of balance sheets for a very profitable furniture manufacturer at its seasonal low point of accounts receivable and inventory are as follows:

20Y1

20Y2

20Y3

Cash

$ 221

$ 230

$ 310

Accounts receivable

794

846

1,194

Inventory

871

1,176

1,099

Other current assets

Total current assets

1,909

2,293

2,639

Net fixed assets

612

624

582

Patents & trademarks

Total non-current assets

646

644

622

Total assets

$ 2,555

$ 2,937

$ 3,261

Notes payable

945

975

1010

Current portion LTD

Accounts payable

551

834

1053

Accrued expenses

155

207

288

Other current liabilities

Total current liabilities

1682

2060

2381

Long-term debt

178

172

165

Total liabilities

1,860

2,232

2,546

Owners equity

695

705

715

Total liabilities and equity

$ 2,555

$ 2,937

$ 3,261

Total liabilities to Tangible net worth

2.8

3.3

3.8

question 4:Which of the following most accurately describes the company’s capital structure?

Leverage is deteriorating, and long-term debt would be more appropriate than short-term notes payable since the company is at its seasonal low point.

Leverage is improving, and long-term debt would be more appropriate than short-term notes payable since the company is at its seasonal low point.

Leverage is improving, and the breakdown of short- and long-term debt is about right.

Leverage is deteriorating, and the breakdown of short- and long-term debt is about right.

Question 5:What was the company’s pretax return on equity in 20Y3?

Company Muebles Mexicanos

61.80%

48.70%

108.90%

41.00%

Question 6: Which of the following had a favorable impact on Muebles Mexicanos’ gross profit margin in the most recent year?

Higher selling prices

Cheaper raw materials

Better efficiencies

Higher regional unemployment

Question 7: A company’s income statements for the past three years are as follows:

20Y1

20Y2

20Y3

Sales

$ 6,515

$ 7,506

$ 8,010

Cost of goods sold

5,473

6,377

6,328

Gross profit

1,042

1,129

1,682

SG&A expense

706

858

1,315

Depreciation expense

Total operating expense

724

882

1,341

Operating profit

318

247

341

Loss on sale of fixed assets

Interest expense

Other expenses

Income before taxes

264

165

208

Taxes

130

100

Net income

$134

$86

$108

: Which of the following best describes the company’s profit margin performance?

The company’s gross profit margin, operating profit margin and net profit margin all trended downward over the three year period.

All profit margins declined in 20Y2. Gross profit margin improved substantially in 20Y3, but the net profit margin only partially recovered.

Gross profit margin and operating profit margin both increased in 20Y2 and 20Y3.

Gross profit margin, operating profit margin and net profit margin all declined in 20Y2 and then fully recovered in 20Y3.

Question 8: The company’s leverage is steadily decreasing. Which of the following is the best explanation?

The company is paying down its long term debt by $400,000 per year while a portion of net income is being retained.

The company’s gross profit margin is steadily increasing and so is the net profit margin.

The company’s total liabilities are steadily decreasing, and net income is steadily increasing.

Most of the liabilities that are increasing are current, and they don’t affect the leverage calculation.

Question 9–In 20Y2, most of Light Touch’s profit margins declined; in 20Y3, they leveled off. Company management expects those same margins to return to 20Y1 levels in 20Y4. How realistic is that expectation?

Company

Light Touch

The company’s high income tax rate makes it quite unlikely that the expectation will be realized.

Light Touch’s steadily improving gross profit margin makes it quite likely that the expectation will be realized.

The company’s operating profit margin has leveled off, indicating the company should be able to fulfill its expectations.

Light Touch’s operating expenses are growing faster than sales. The company will need to control those costs better in order to meet its expectations.

Question 10 Review the following year end financial statement excerpts to answer the question below.

20Y1

20Y2

20Y3

Sales

$ 2,500

$ 3,000

$ 3,570

Cost of goods sold

1,773

2,093

2,467

Gross profit

$ 727

$ 907

$ 1,103

Cash

$ 100

$ 123

$ 66

Accounts receivable

240

303

376

Inventory

417

461

547

Other current assets

117

107

Total current assets

$ 874

$ 957

$ 1,096

Which of the following best describes the company’s inventory over the past three years?

Inventory days on hand was stable in 20Y2 and slower in 20Y3.

Inventory days on hand improved in 20Y2 and lengthened slightly in 20Y3.

Inventory days on hand was stable in all three years.

Inventory days on had improved in all three years.

LightTouch

LLiigghhtt

TToouucchh
The following case information includes:

• Part A
 Company information

• Part B

 Balance sheets
 Income statements

• Part C

 Industry data

• Part D

 Cash flow summary

Light Touch Part A

2 Credit Skills Assessment OLCB.LT.000.1212.CSAX.US

CCoommppaannyy IInnffoorrmmaattiioonn
Twenty-three years ago, chemical engineer Mike Cavallon developed a plastic material that behaved
like leather but felt like peach fuzz. Recognizing that such a material could be valuable in cleaning
applications, he continued his research until he could produce an effective, non-abrasive cleaner that
was durable enough to meet industrial requirements. He organized a company and named it after his
product, Light Touch, and for several years he manufactured cleaning cloths and sold them to a
variety of businesses in his geographic area.

It then occurred to Mike that Light Touch would be an ideal product for drive-through car-wash
operations. He designed “brushes” with many long strips of Light Touch, which, as he described
them, “caressed the car instead of brushing it,” getting it clean without scratching. Car-wash owners
were quick to recognize the benefits of Light Touch, and in a few years, nearly all of them were
using it in their operations.

Light Touch’s sales are heaviest in the spring and summer months, and its seasonal low point occurs
in January and February when freezing temperatures make washing cars much less practical.

Recently, Mike has successfully marketed Light Touch “brushes” to car washes over a much broader
geographical market – including some with much warmer winters. Not surprisingly, this is evening
out the seasonality of his sales.

Today is April 1, 20Y4. You have just been assigned the Light Touch account relationship for your
bank.

Light Touch has been a bank customer since its inception. The bank has provided fixed-asset
financing on numerous occasions – most recently in 20Y0, when the company refinanced $2 million
of existing term debt and borrowed $2 million in new money for its expansion into car-wash
brushes.

Your bank also made available to the company what has now grown to a $2 million line of credit
facility. As a condition of extending this line, the bank has required that Light Touch be out of debt
for 60 consecutive days during the first quarter of every year (the clean-up period). Until last year,
the company was able to meet the clean-up requirement easily every year. At the end of January
20Y4, however, the company was unable to clean up the line. In fact, at the end of February, the
outstanding balance was $602,000. The company was unable to reduce the line significantly below
$600,000 at any time during the entire first quarter. Your predecessor on the account waived the
clean-up requirement on the basis of his strong confidence in the company’s management and the
company’s excellent conduct of its account with the bank over the years. The balance on the line of
credit as of March 30 was $918,000.

The credit file contains notes made by the former account manager that describe management’s
expectation of continuing growth, especially in the Car Wash division, on the order of 20 percent in
20Y4. Light Touch has requested a $1 million increase in the line of credit facility.

Light Touch Part B

20Y3 20Y2 20Y1

ASSETS
Current assets
Cash $ 0 $ 0 600$
Accounts receivable 2,454 2,158 1,440
Inventory 3,480 3,168 2,500
Prepaid expenses 416 240 302
Other current assets 224 180 400
Total current assets 6,574 5,746 5,242

Fixed assets 2,030 1,542 1,470

Other noncurrent assets 640 420 428

TOTAL ASSETS 9,244$ 7,708$ 7,140$

LIABILITIES AND EQUITY
Current liabilities
Short-term debt 604$ 20$ $ 0
Current portion—LTD 400 400 400
Accounts payable 1,672 1,426 890
Accrued expenses 412 384 340
Dividends payable 90 0 0
Taxes payable 216 138 128
Other current liabilities 60 32 152
Total current liabilities 3,454 2,400 1,910

Long-term debt 1,984 2,384 2,784

Deferred taxes 120 116 108

Stockholder’s equity
Paid-in capital 2,306 2,000 2,000
Retained earnings 1,380 808 338
Total stockholders’ equity 3,686 2,808 2,338

TOTAL LIABILITIES AND EQUITY 9,244$ 7,708$ 7,140$

Working investment 3,850$ 3,516$ 2,710$

Light Touch
Balance Sheets

(in $000s)
As At December 31:

Light Touch Part B

20Y3 20Y2 20Y1

Sales 21,420$ 18,000$ 15,000$
Depreciation expense 206 162 150
Cash cost of goods sold 14,694 12,498 10,490
Gross profit 6,520 5,340 4,360

Operating expenses 3,988 3,218 2,454
Interest expense 260 252 286
Income before taxes 2,272 1,870 1,620

Taxes 1,128 892 648
Net income 1,144$ 978$ 972$

Dividends 572 508 388

Retained earnings 572$ 470$ 584$

Light Touch
Income Statements

(in $000s)
Years Ended December 31:

Light Touch Part C

20Y3 20Y2 20Y1
BALANCE SHEETS
Current assets
Cash and equivalents 5.5 % 4.9 % 4.2 %
Accounts receivable 27.0 25.3 23.8
Inventory 39.8 40.7 42.7
Other current assets 1.7 1.6 1.5
Total current assets 74.0 72.5 72.2

Fixed assets (net) 19.5 20.8 21.1

Other noncurrent assets 6.5 6.7 6.7

TOTAL ASSETS 100.0 % 100.0 % 100.0 %

Current liabilities
Short-term debt 14.1 14.0 14.1
Current maturities—LTD 3.0 3.1 3.3
Accounts payable 15.1 13.3 12.0
Accrued expenses 10.4 10.8 11.0
Total current liabilities 42.6 41.2 40.4

Long-term debt 15.4 16.7 17.5

Other noncurrent liabilities 2.3 2.1 2.0

Equity and reserves 39.7 40.0 40.1

TOTAL LIABILITIES AND EQUITY 100.0 % 100.0 % 100.0 %

20Y3 20Y2 20Y1
INCOME STATEMENTS
Net sales 100.0 % 100.0 % 100.0 %
Cost of goods sold 67.8 69.1 70.1
Gross profit 32.2 30.9 29.9

Operating expenses 25.8 25.3 25.9
Operating profit 6.4 5.6 4.0

All other expenses 2.0 1.8 2.1
Income before taxes 4.4 % 3.8 % 1.9 %

RATIOS AND INDICATORS
Current ratio (range) 1.3–2.7 1.4–2.6 1.3–2.6
Accounts receivable DOH (range) 36–72 34–68 35–74
Inventory DOH (range) 70–165 81–170 85–185
Sales/Total assets (range) 1.5–2.5 1.4–2.4 1.3–2.1

Cleaning Equipment Manufacturers
Industry Data

Light Touch Part D

Cash Flow Summary (in $000s)
Company Name: Light Touch

+ –

A (U) S

L/E S (U)

Target Line Number 20Y2 20Y3
Sales revenue (net) (1) 18,000 21,420


 Accounts receivable (2) (718) (296)
Cash collected from sales (3) 17,282 21,124

Cash cost of goods sold (4) (12,498) (14,694)
 Inventory (5) (668) (312)
 Accounts payable (6) 536 246


Cash paid for production (7) (12,630) (14,760)
Cash from trading activities (3) + (7) = (8) 4,652 6,364

Cash SG&A expense (9) (3,218) (3,988)
 Prepaid expenses (10) 62 (176)
 Accrued expenses (11) 44 28


Cash paid for operating costs (12) (3,112) (4,136)
Cash after operations (8) + (12) = (13) 1,540 2,228

Other income (expense) (14) 0 0
 Other current and noncurrent accounts (15) 108 (236)
Income tax expense (16) (892) (1,128)
 Deferred income taxes (17) 8 4
 Income taxes payable (18) 10 78


Taxes paid and other income (expense) (19) (766) (1,282)
Net cash after operations (13) + (19) = (20) 774 946

Interest expense (21) (252) (260)
 Interest payable (22) 0 0
Dividends declared or owners’ withdrawals (23) (508) (572)
 Dividends payable (24) 0 90


Cash paid for dividends and interest (25) (760) (742)
Cash after financing costs (20) + (25) = (26) 14 204


Current portion long-term debt (prior year) (27) (400) (400)
Cash after debt amortization (26) + (27) = (28) (386) (196)

 Fixed assets (29) (234) (694)
 Investments (30) 0 0
 Intangibles (31) 0 0


Cash paid for plant and investments (32) (234) (694)
Financing surplus (requirement) (28) + (32) = (33) (620) (890)

 Short-term debt (notes payable) (34) 20 584
 Long-term debt (35) 0 0
 Preferred stock (36) 0 0
 Common stock (37) 0 306
Total external financing (38) 20 890


Financing surplus (requirement) +
Total external financing (33) + (38) = (39) (600) 0

PROOF:  Cash and marketable securities (40) (600) 0

MueblesMexicanos

MMuueebblleess

MMeexxiiccaannooss
The following case information includes:

• Part A

 Company information

• Part B

 Balance sheets

 Income statements

 Statement of cash flow

• Part C

 Industry data

• Part D

 Cash flow summary

Muebles Mexicanos Part A

2 Commercial Loans to Business Online ASCB.MM.000.0113.CLB-OL.US-En

CCoommppaannyy IInnffoorrmmaattiioonn
Muebles Mexicanos retails rustic Mexican wooden furniture and accessories.

Tripp and Kelly Gordon founded the business 11 years ago and continue as its owners/managers
today (July 20Y4). At the outset, they had one store—as the business grew, they added two more.

The furniture is inexpensively built with pine, roughly finished and accented with interesting
hardware (hinges, drawer pulls, etc.). It appeals to people with second homes who desire a rustic,
understated look in their furnishings. The principal selling season is between April and October.

The furniture is produced by three Mexican manufacturers, and the accessories are supplied by a
variety of sources in that country. Tripp makes frequent buying trips and coordinates the stocking of
all three stores, while Kelly manages staffing, marketing, and financing the business.

Recently, you ran into Tripp, an old school friend of yours, at a class reunion. The subject of
business came up, and he and Kelly invited you and your spouse to visit their flagship store. You
were intrigued by the casual, sawdust-on-the-floor ambience, which made it easy to believe that
whatever one bought must be substantially cheaper than it would be elsewhere.

Kelly: “For our first eight or nine years, we were just about making a living selling to young
couples furnishing their first homes. Then we realized that we could appeal to the
upscale market as well if we positioned ourselves properly. We began advertising in
some of the more exclusive periodicals, and our business simply took off! Last year,
we launched a major campaign, and sales nearly doubled. This year, we have cut back
on advertising, allowing word-of-mouth to do more of the job, and our unit sales are
running 13 percent ahead of last year. That’s in spite of our having raised our prices
10 percent in January!”

Tripp: “It’s been a real mixed blessing for our suppliers. They’re delighted with our
increased sales, but they’re hard pressed to keep up with the demand. I shouldn’t be
surprised if they start raising their prices one of these days.”

Kelly: “That could present a bit of a problem for us. Most of our competitors buy from the
same producers, but their markup averages 300 to 350 percent. Our principal
competitive advantage is our lower prices, which we achieve by holding our markup
to 150 percent. That’s still enough to turn a decent profit, but obviously a cost
increase will cut more deeply into our margins than it will into theirs. Our other
competitive edges are our delivery and credit policies. Delivery is free if the order is
for $150 or more. Even if an order fails to meet that hurdle, our nominal charge is
still quite reasonable. We offer a 50-50 credit policy for qualified customers. They
pay 50% down and the balance is paid over six months, interest free.

“We enjoy an excellent relationship with our current bankers at Fourth Financial
Bank, but they’re unable to offer any line of credit in excess of $500,000. At our
present rate of growth, assuming that the bank will lend 50 percent of our inventory,
we’ll need to borrow at least $800,000 or $900,000 next spring. If your bank can
match Fourth Financial’s terms, we’d be more than willing to divide our business
between you, and, if you can offer better terms, we could give you the lion’s share.

Muebles Mexicanos Part A

Having said that, we would keep at least a portion of our business with Fourth
Financial, as they were very good to us when we were just starting out.

“Just so you have the complete picture, I do want to mention one problem we seem
to be experiencing with Fourth Financial. Because, early on, we expected this to be a
seasonal business, we applied for and were granted a seasonal line of credit, which
has served us very well. The bank’s been good about increasing it as we’ve grown to
the $500,000 I mentioned, but lately there’s been another issue. As we’ve become
better known in our areas, the autumn and winter demand for our merchandise has
grown even faster than our peak-season growth.”

Tripp: “Our accessories make economical but very imaginative Christmas gifts and that sort
of thing, with the result that we’ve been unable to pay down our line of credit in
January as we used to. It’s a nice problem to have, but the bank seems to feel it is a
problem nonetheless, and has made it quite clear that they won’t accept another
winter without their being fully repaid or, at least, very nearly so. We’re not at all sure
what we can do about it, and we’d welcome any suggestions you might offer.”

You replied that you’d be pleased to look into their situation and asked for a copy of their recent
financial statements. Kelly handed you the statements for their last three years as you were leaving,
and you promised to get back to them in a few days.

The financial statements for Muebles Mexicanos follow.

Muebles Mexicanos Part B

20Y3 20Y2 20Y1

ASSETS
Current assets
Cash 51$ 62$ 42$

Accounts receivable 135 44 28
Inventory 317 210 173
Total current assets 503 316 243

Fixed assets
Gross fixed assets 202 157 138
Less: Accumulated depreciation 115 82 73
Net fixed assets 87 75 65

Other noncurrent assets 7 2 6

TOTAL ASSETS 597$ 393$ 314$

LIABILITIES AND EQUITY
Current liabilities
Short-term debt $ 177 $ 103 $ 85
Current portion—LTD 4 4 4
Accounts payable 104 65 51
Accrued expenses 76 42 34
Other current liabilities 7 5 3
Total current liabilities 368 219 177

Long-term debt 4 8 12
Total liabilities 372 227 189

Owners’ equity 225 166 125

TOTAL LIABILITIES AND EQUITY 597$ 393$ 314$

Muebles Mexicanos
Balance Sheets

(in $000s)
As At December 31:

Muebles Mexicanos Part B

20Y3 20Y2 20Y1

Sales 2,722$ 1,500$ 1,281$
Cost of goods sold 1,068 608 512
Gross profit 1,654 892 769

Selling, general, and administrative expense 1,307 690 584
Depreciation expense 40 24 23
Total SG&A expenses 1,347 714 607

Interest expense 39 23 21
Loss on sale of fixed assets 8 0 0
Other expenses 15 6 0
Income before taxes 245 149 141

Taxes 106 68 62

Net income 139$ 81$ 79$

Dividends 80 40 40

Retained earnings 59$ 41$ 39$

Muebles Mexicanos
Income Statements

(in $000s)
Years Ended December 31:

Muebles Mexicanos Part B

OPERATING ACTIVITIES
Net income 139$
Adjustments to reconcile net income to net cash provided
(used) by operating activities
Depreciation 40
Loss on disposition of fixed assets 8
Changes in:
Accounts receivable (91)
Inventory (107)
Other noncurrent assets (5)
Accounts payable 39
Accruals 34
Other current liabilities 2
Net cash provided by (used in) operating activities 59$

INVESTING ACTIVITIES
(Purchases) of fixed assets (80)$
Proceeds of sale of fixed assets 20
Net cash provided by (used in) investing activities (60)$

FINANCING ACTIVITIES
Proceeds from short-term borrowing 74$
(Payments) on long-term debt (4)
Cash dividends (paid) (80)
Net cash provided by (used in) financing activities (10)$

Increase (Decrease) in cash and cash equivalents (11)$

Beginning cash and cash equivalents 62$

Ending cash and cash equivalents 51$

Muebles Mexicanos
Statement of Cash Flow

(in $000s)
Year Ended December 31, 20Y3

Muebles Mexicanos Part C

20Y3 20Y2 20Y1
BALANCE SHEETS
Current assets
Cash and equivalents 1.8 % 2.5 % 3.2 %
Accounts receivable 11.3 10.7 10.4
Inventory 52.5 53.1 47.2
Other current assets 0.9 1.5 4.4
Total current assets 66.5 67.8 65.2

Fixed assets (net) 31.8 30.4 33.5

Other noncurrent assets 1.7 1.8 1.3

TOTAL ASSETS 100.0 % 100.0 % 100.0 %

Current liabilities
Short-term debt 27.1 25.8 27.4
Current maturities—LTD 2.6 2.8 2.4
Accounts payable 18.1 15.8 17.2
Accrued expenses 10.0 8.9 9.1
Total current liabilities 57.8 53.3 56.1

Long-term debt 4.6 5.1 4.4
Other noncurrent liabilities 1.0 1.2 0.7
Total liabilities 63.4 59.6 61.2

Equity and reserves 36.6 40.4 38.8

TOTAL LIABILITIES AND EQUITY 100.0 % 100.0 % 100.0 %

20Y3 20Y2 20Y1
INCOME STATEMENTS
Net sales 100.0 % 100.0 % 100.0 %
Cost of goods sold 23.4 22.7 24.0
Gross profit 76.6 77.3 76.0

Operating expenses 59.5 58.0 57.4
Operating profit 17.1 19.3 18.6

All other expenses 8.2 8.5 8.3
Income before taxes 8.9 % 10.8 % 10.3 %

RATIOS AND INDICATORS
Current ratio (range) 1.0–1.6 1.1–1.7 1.1–1.5
Accounts receivable DOH (range) 3.0–24.0 2.0–17.0 3.0–20.0
Inventory DOH (range) 73–157 68–151 79–152

Furniture Retailers
Industry Data

Muebles Mexicanos Part D

Cash Flow Summary (in $000s)
Company Name: Muebles Mexicanos

+ –

A (U) S

L/E S (U)

Target Line Number 20Y2 20Y3

 Sales revenue (net) (1) 1,500 2,722


 Accounts receivable (2) (16) (91)
Cash collected from sales (3) 1,484 2,631


 Cash cost of goods sold (4) (608) (1,068)
  Inventory (5) (37) (107)
  Accounts payable (6) 14 39


Cash paid for production (7) (631) (1,136)
Cash from trading activities (3) + (7) = (8) 853 1,495


 Cash SG&A expense (9) (690) (1,307)
  Prepaid expenses (10) 0 0
  Accrued expenses (11) 8 34


Cash paid for operating costs (12) (682) (1,273)
Cash after operations (8) + (12) = (13) 171 222


 Other income (expense) (14) (6) (15)
  Other current and noncurrent accounts (15) 6 (3)
 Income tax expense (16) (68) (106)
  Deferred income taxes (17) 0 0
  Income taxes payable (18) 0 0


Taxes paid and other income (expense) (19) 68 (124)
Net cash after operations (13) + (19) = (20) 103 98

Interest expense (21) (23) (39)
 Interest payable (22) 0 0
Dividends declared or owners’ withdrawals (23) (40) (80)
 Dividends payable (24) 0 0


Cash paid for dividends and interest (25) (63) (119)
Cash after financing costs (20) + (25) = (26) 40 (21)


Current portion long-term debt (prior year) (27) (4) (4)
Cash after debt amortization (26) + (27) = (28) 36 (25)

 Fixed assets (29) (34) (60)
 Investments (30) 0 0
 Intangibles (31) 0 0


Cash paid for plant and investments (32) (34) (60)
Financing surplus (requirement) (28) + (32) = (33) 2 (85)

 Short-term debt (notes payable) (34) 18 74
 Long-term debt (35) 0 0
 Preferred stock (36) 0 0
 Common stock (37) 0 0
Total external financing (38) 18 74


Financing surplus (requirement) +
Total external financing (33) + (38) = (39) 20 (11)

PROOF:  Cash and marketable securities (40) 20 (11)

<< /ASCII85EncodePages false /AllowTransparency false /AutoPositionEPSFiles true /AutoRotatePages /None /Binding /Left /CalGrayProfile (Dot Gain 20%) /CalRGBProfile (sRGB IEC61966-2.1) /CalCMYKProfile (U.S. Web Coated \050SWOP\051 v2) /sRGBProfile (sRGB IEC61966-2.1) /CannotEmbedFontPolicy /Error /CompatibilityLevel 1.4 /CompressObjects /Tags /CompressPages true /ConvertImagesToIndexed true /PassThroughJPEGImages true /CreateJobTicket false /DefaultRenderingIntent /Default /DetectBlends true /DetectCurves 0.0000 /ColorConversionStrategy /CMYK /DoThumbnails false /EmbedAllFonts true /EmbedOpenType false /ParseICCProfilesInComments true /EmbedJobOptions true /DSCReportingLevel 0 /EmitDSCWarnings false /EndPage -1 /ImageMemory 1048576 /LockDistillerParams false /MaxSubsetPct 100 /Optimize true /OPM 1 /ParseDSCComments true /ParseDSCCommentsForDocInfo true /PreserveCopyPage true /PreserveDICMYKValues true /PreserveEPSInfo true /PreserveFlatness true /PreserveHalftoneInfo false /PreserveOPIComments true /PreserveOverprintSettings true /StartPage 1 /SubsetFonts true /TransferFunctionInfo /Apply /UCRandBGInfo /Preserve /UsePrologue false /ColorSettingsFile () /AlwaysEmbed [ true ] /NeverEmbed [ true ] /AntiAliasColorImages false /CropColorImages true /ColorImageMinResolution 300 /ColorImageMinResolutionPolicy /OK /DownsampleColorImages true /ColorImageDownsampleType /Bicubic /ColorImageResolution 300 /ColorImageDepth -1 /ColorImageMinDownsampleDepth 1 /ColorImageDownsampleThreshold 1.50000 /EncodeColorImages true /ColorImageFilter /DCTEncode /AutoFilterColorImages true /ColorImageAutoFilterStrategy /JPEG /ColorACSImageDict << /QFactor 0.15 /HSamples [1 1 1 1] /VSamples [1 1 1 1] >>
/ColorImageDict << /QFactor 0.15 /HSamples [1 1 1 1] /VSamples [1 1 1 1] >>
/JPEG2000ColorACSImageDict << /TileWidth 256 /TileHeight 256 /Quality 30 >>
/JPEG2000ColorImageDict << /TileWidth 256 /TileHeight 256 /Quality 30 >>
/AntiAliasGrayImages false
/CropGrayImages true
/GrayImageMinResolution 300
/GrayImageMinResolutionPolicy /OK
/DownsampleGrayImages true
/GrayImageDownsampleType /Bicubic
/GrayImageResolution 300
/GrayImageDepth -1
/GrayImageMinDownsampleDepth 2
/GrayImageDownsampleThreshold 1.50000
/EncodeGrayImages true
/GrayImageFilter /DCTEncode
/AutoFilterGrayImages true
/GrayImageAutoFilterStrategy /JPEG
/GrayACSImageDict << /QFactor 0.15 /HSamples [1 1 1 1] /VSamples [1 1 1 1] >>
/GrayImageDict << /QFactor 0.15 /HSamples [1 1 1 1] /VSamples [1 1 1 1] >>
/JPEG2000GrayACSImageDict << /TileWidth 256 /TileHeight 256 /Quality 30 >>
/JPEG2000GrayImageDict << /TileWidth 256 /TileHeight 256 /Quality 30 >>
/AntiAliasMonoImages false
/CropMonoImages true
/MonoImageMinResolution 1200
/MonoImageMinResolutionPolicy /OK
/DownsampleMonoImages true
/MonoImageDownsampleType /Bicubic
/MonoImageResolution 1200
/MonoImageDepth -1
/MonoImageDownsampleThreshold 1.50000
/EncodeMonoImages true
/MonoImageFilter /CCITTFaxEncode
/MonoImageDict << /K -1 >>
/AllowPSXObjects false
/CheckCompliance [
/None
]
/PDFX1aCheck false
/PDFX3Check false
/PDFXCompliantPDFOnly false
/PDFXNoTrimBoxError true
/PDFXTrimBoxToMediaBoxOffset [
0.00000
0.00000
0.00000
0.00000
]
/PDFXSetBleedBoxToMediaBox true
/PDFXBleedBoxToTrimBoxOffset [
0.00000
0.00000
0.00000
0.00000
]
/PDFXOutputIntentProfile ()
/PDFXOutputConditionIdentifier ()
/PDFXOutputCondition ()
/PDFXRegistryName ()
/PDFXTrapped /False
/CreateJDFFile false
/Description << /ARA
/BGR
/CHS
/CHT
/CZE
/DAN
/DEU
/ESP
/ETI
/FRA
/GRE
/HEB
/HRV (Za stvaranje Adobe PDF dokumenata najpogodnijih za visokokvalitetni ispis prije tiskanja koristite ove postavke. Stvoreni PDF dokumenti mogu se otvoriti Acrobat i Adobe Reader 5.0 i kasnijim verzijama.)
/HUN
/ITA
/JPN
/KOR
/LTH
/LVI
/NLD (Gebruik deze instellingen om Adobe PDF-documenten te maken die zijn geoptimaliseerd voor prepress-afdrukken van hoge kwaliteit. De gemaakte PDF-documenten kunnen worden geopend met Acrobat en Adobe Reader 5.0 en hoger.)
/NOR
/POL
/PTB
/RUM
/RUS
/SKY
/SLV
/SUO
/SVE
/TUR
/UKR
/ENU (Use these settings to create Adobe PDF documents best suited for high-quality prepress printing. Created PDF documents can be opened with Acrobat and Adobe Reader 5.0 and later.)
>>
/Namespace [
(Adobe)
(Common)
(1.0)
]
/OtherNamespaces [
<< /AsReaderSpreads false /CropImagesToFrames true /ErrorControl /WarnAndContinue /FlattenerIgnoreSpreadOverrides false /IncludeGuidesGrids false /IncludeNonPrinting false /IncludeSlug false /Namespace [ (Adobe) (InDesign) (4.0) ] /OmitPlacedBitmaps false /OmitPlacedEPS false /OmitPlacedPDF false /SimulateOverprint /Legacy >>
<< /AddBleedMarks false /AddColorBars false /AddCropMarks false /AddPageInfo false /AddRegMarks false /ConvertColors /ConvertToCMYK /DestinationProfileName () /DestinationProfileSelector /DocumentCMYK /Downsample16BitImages true /FlattenerPreset << /PresetSelector /MediumResolution >>
/FormElements false
/GenerateStructure false
/IncludeBookmarks false
/IncludeHyperlinks false
/IncludeInteractive false
/IncludeLayers false
/IncludeProfiles false
/MultimediaHandling /UseObjectSettings
/Namespace [
(Adobe)
(CreativeSuite)
(2.0)
]
/PDFXOutputIntentProfileSelector /DocumentCMYK
/PreserveEditing true
/UntaggedCMYKHandling /LeaveUntagged
/UntaggedRGBHandling /UseDocumentProfile
/UseDocumentBleed false
>>
]
>> setdistillerparams
<< /HWResolution [2400 2400] /PageSize [612.000 792.000] >> setpagedevice