Actividad 5.

4 Problemas del captulo 4

Problema 5. Cindy and Robert (Rob) Castillo founded the Castillo Products Company in 2006. The company manufactures components for personal decision assistant (PDA) products and for other hand-held electronic products. Year 2007 proved to be a test of the Castillo Products Companys ability to survive. However, sales increased rapidly in 2008 and the firm reported a net income after taxes of $75,000. Depreciation expenses were $40,000 in 2008. Following are the Castillo Products Companys balance sheets for 2007 and 2008.

CASTILLO PRODUCTS COMPANY 2007 2008 Cash 50,000 20,000 Accounts Receivables 200,000 280,000 Inventories 400,000 500,000 Total Current Assets 650,000 800,000 Gross Fixed Assets 450,000 540,000 Accumulated Depreciation (100,000) (140,000) Net Fixed Assets 350,000 400,000 Total Assets 1,000,000 1,200,000 Accounts Payable Accruals Bank Loan Total Current Liabilities Long-Term Debt Common Stock Paid-in-Capital Retained Earnings Total Liabilities & Equity a) b) c) d) 130,000 160,000 50,000 70,000 90,000 100,000 270,000 330,000 300,000 400,000 150,000 150,000 200,000 200,000 80,000 120,000 1,000,000 1,200,000

(30,000) 80,000 100,000 150,000 90,000 (40,000) 50,000 200,000 30,000 20,000 10,000 60,000 100,000 0 0 40,000 200,000

Calculate Castillos cash flow from operating activities for 2008. Calculate Castillos cash flow from investing activities for 2008. Calculate Castillos cash flow from financing activities for 2008. Prepare a formal statement of cash flows for 2008 and identify the major cash inflows and outflows that were generated by the Castillo Company. e) Use your calculation results from Parts A and B above to determine whether Castillo was building or burning cash during 2008 and indicate the dollar amount of the cash build or burn. f) If Castillo had a net cash burn from operating and investing activities in 2008 divide the amount of burn by 12 to calculate an average monthly burn amount. If the 2009 monthly cash burn continues at the 2008 rate, indicate how long in months it will be before the firm runs out of cash if there are no changes in financing activities.

Because Retained Earning increased by only 40,000 and Net Income was 75,000, Cash Dividends paid must have been 35,000. Parts A-D: Statement of Cash Flows Cash from Operating Activities: Net income Depreciation Increse in accounts receivable Increase in inventories Increase in accounts payable Increase in accrued liabilities a) Net from Operating Activities Cash from Investing Activities: Increase in gross fixed assets b) Net from Investing Activities Cash from Financing Activities: Increase in bank loan Increase in long-term debt Cash dividends paid c) Net from Financing Activities Total net cash increase (decrease) Cash at begining of period d) Total net cash increase (decrease) Part E: Operating activities (-15) + Investing activities (-90) = Part F: Monthly burn rate = Annual burn/12 Time to Out of Cash = Cash/Mthly Burn = 105,000 / 12 = = 20,000 / 87,50 = 8,750 per month 2.29 months (105,000) (annual net cash burn) 2008 75,000 40,000 (80,000) (100,000) 30,000 20,000 (15,000) dato dado

(90,000) (90,000)

10,000 100,000 (35,000) 75,000 (30,000) 50,000 20,000

entre Ingreso Neto y Ut. Retenidas.

Bibliografa Leach, J. C., & Melicher, R. W. (2009). Introduction and Overview. In Entrepreneurial finance . Mason, OH: SouthWestern Cengage Learning.