Essay
A comparative balance sheet for Otto Inc.is presented below:
Additional information:
1.Net income for 2012 was $105,000.
2.Cash dividends of $40,000 were declared and paid.
3.Bonds payable amounting to $50,000 were retired through issuance of common stock.
Required:
(a)Prepare a statement of cash flows for 2012 for Otto,Inc.
(b)Compute Otto's current cash debt coverage ratio and cash debt coverage ratio.
(c)Determine Otto Inc.'s free cash flow and comment on its liquidity and financial flexibility.
Correct Answer:
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(a)
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