Attached is the actual Financial Statements, Cash Flow, and Taxes associated with the assignment questions below. 2007 & 2008 statements below.
We are working on a comprehensive/spreadsheet problem (financial statements, cash flow and taxes). A balance sheet for a company called Laiho Industries.
a. Sales for 2008 were $455,150,000 and EBITDA was 15% of sales. Furthermore, depreciation and amortization were 11% of net fixed assets, interest was $8,575,000, the corporate tax rate was 40% of its net income in dividends. Given this information , construct the firm's 2008 income statement.
b. Construct the statement of stockholder's equity for the year ending December 31, 2008, and the 2008 statement of cash flow
c. Calculate 2007 and 2008 net working capital and 2008 free cash flow.
d. If Laiho increased its dividend payout ratio, what effect would this have on corporate taxes paid? What effect would this have on taxes paid by the company's shareholders?
2008
Cash $102, 850
Accounts receivable 103, 365
Inventories 38, 444
Total current assets $244,659
Net fixed assets 67, 165
Total Assets $311,824
Accounts payable $30, 761
Accruals 30, 477
Notes Payable 16,717
Total current liabilities $77, 955
Long – term debit $76,264
Total liabilities $154,219
Common stock $100,000
Retained earnings $57,605
Total common equity $157, 605
Total liabilities and equity $311,824
2007
Cash 89725
Accounts receivable 85527
Inventories 34982
Total current assets $210,234
Net fixed assets 42436
Total Assets $252,670
Accounts payable 23109
Accruals 22656
Notes Payable 14,217
Total current liabilities 59982
Long – term debit $63,914
Total liabilities $123,896
Common stock $90,000
Retained earnings $38,774
Total common equity 128774
Total liabilities and equity $252,670
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To answer the questions, we first need to gather the necessary information from the given financial statements. Let's start with question a.
a. To construct the firm's 2008 income statement, we need to calculate several values based on the given information:
Sales = $455,150,000
EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) = 15% of sales = 0.15 * $455,150,000
Depreciation and amortization = 11% of net fixed assets = 0.11 * $67,165,000
Interest = $8,575,000
Corporate tax rate = 40%
Using these values, we can construct the income statement:
Sales: $455,150,000
- COGS (Cost of Goods Sold): (Sales - EBITDA) = $455,150,000 - (0.15 * $455,150,000)
- Depreciation and amortization: $67,165,000 * 0.11
= EBIT (Earnings Before Interest and Taxes)
- Interest: $8,575,000
= Taxable income (EBIT - Interest)
- Taxes: Taxable income * Corporate tax rate
= Net income (Taxable income - Taxes)
b. To construct the statement of stockholder's equity and the statement of cash flow for 2008, we need information about changes in equity and cash flow activities. Unfortunately, this information is not provided in the given financial statements. We would need more details to answer this question accurately.
c. To calculate the 2007 and 2008 net working capital and 2008 free cash flow, we can use the following formulas:
Net Working Capital (NWC) = Total Current Assets - Total Current Liabilities
For 2007:
NWC = $210,234 - $59,982
For 2008:
NWC = $244,659 - $77,955
Free Cash Flow (FCF) = Net Cash Flow from Operations - Net Cash Flow from Investing Activities
Unfortunately, we don't have the information about cash flow activities in the given financial statements. We would need more details to calculate the free cash flow accurately.
d. If Laiho increased its dividend payout ratio, it would have the following effects on corporate taxes paid and taxes paid by shareholders:
Corporate taxes paid: Increasing the dividend payout ratio would increase the dividends paid to shareholders. Dividends are not tax-deductible expenses for the company, so higher dividends would result in higher taxable income for the company. Consequently, the company would have to pay higher corporate taxes.
Taxes paid by shareholders: Shareholders receiving higher dividends would have to pay taxes on the increased dividend income according to their individual tax rates. This means that shareholders would have to pay more taxes on the increased dividends received.
Please note that the calculations for net working capital and free cash flow, as well as the effects of increasing the dividend payout ratio on taxes, would require more information than what is provided in the given financial statements.