Problem 1: If"typical" firms reports $20 million of retained earnings on its balance sheet, could its director declare a $20 million cash dividend without having any qualms about what they were doing? Explain your answer.
Problem 2: Which of the following actions are most likely to directly increase cash as shown on firm balance sheet? Explain and state the assumptions that underline your answer.
a. It issues $2 million of new stock.
b. It buys new plant and equipment at a cost of $3 million.
c. It reports a large loss for the year.
d. It increases the dividends paid on its common stock.
Problem 3: W.C. Cycling had $55,000 in cash at year end 2010 and $25,000 in cash at year end 2011. The firm invested in property, plant, and equipment totaling $250,000. Cash flow from financing activities totaled +$170,000.
a. What was the cash flow from operating activities?
b. If accruals increased by $25,000, receivables and inventories increased by $100,000, and depreciation and amortization totaled $10,000, what was the firm's net income?