Question

Bailey Corporation's financial statements (dollars and shares are in millions) are provided here. Bailey Corporation (in...

Bailey Corporation's financial statements (dollars and shares are in millions) are provided here.
Bailey Corporation
(in million of dollars)
Balance Sheets as of December 31 2016 2015
Assets
Cash and cash equivalents $     14,000 $       13,000
Accounts receivable         30,000            25,000
Inventories         28,125            21,000
Total current assets $     72,125 $       59,000
Net fixed assets         50,000            47,000
Total assets $   122,125 $     106,000
Liabilities and equity
Accounts payable $     10,800 $          9,000
Notes payable            6,700              5,150
Accruals            7,600              6,000
Total current liabilities $     25,100 $       20,150
Long-term bonds         15,000            15,000
Total liabilities $     40,100 $       35,150
Common stock         50,000            50,000
Retained Earnings         32,025            20,850
Total common equity $     82,025 $       70,850

Total liabilities and equity

Income Statement for Year Ending 2016
Sales $214,000
Expenses excl. depr & amort. 170,000
EBITDA $44,000
Depreciation and amortization 5,000
EBIT $39,000
Interest expense 1,750
EBT $37,250
Taxes (40%) 14,900
Net Income $22,350
Dividends paid $11,175
a.   What was the change in Bailey's net operating working capital from 2015 to 2016?
∆ NOWC = write the formula
calculate the answer
b.   What was Bailey's 2016 free cash flow?
FCF = write the formula
calculate the answer

$   122,125

$     106,000
Business   Accounting   
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Homework Answers

Answer #1

1-

net operating working capital in 2015

total current asset-(current liabilities-notes payable)

59000-(20150-5150)

44000

net operating working capital in 2016

total current asset-(current liabilities-notes payable)

72125-6700

65425

change in net operating working capital

net operating working capital 2016-net operating working capital 2015

65425-44000

21425

2-

Free cash flow

(EBIT*(1 – T) + Depreciation) – (Capital expenditures + increase in NOWC)

(39000*(1-.4)+(5000)-(3000+ 21425)

3975
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