24.Under the direct method, what will Stone find Soft Corporation's projected net change in cash to be for the year ending December 31, 2005?

A)   $9,000,000.

B)   $2,000,000.

C)   $4,000,000.

D)   $7,000,000.

25.John Stone, CFA, is an investment advisor specializing in the preparation of company and industry reports for high net worth customers at Learmon Brothers. Currently, Stone is preparing a report on Soft Corporation, a rapidly growing software company. The explosive growth of this company was financed primarily by an initial public offering in which 3,000,000 shares were issued at a price of $20 per share on June 27, 2004. Soft Corporation received additional capital when employee stock options for 1,000,000 shares at a price of $10 were exercised on January 1, 2005. Stone realizes the importance of cash flow on a company's financial health and would like to include a projected statement of cash flows for 2005. Soft Corporation financial statements are presented in Tables 1 and 2. Included are the projected statements for the year ending December 31, 2005.

Stone decides to use the direct method to compute Soft Corporation's projected operating cash collections. Using this method, which of the following is Soft Corporation's projected operating cash collections for the year ending December 31, 2005 (in millions)?

A)   1.0.

B)   198.0.

C)   224.0.

D)   191.0.

答案和详解如下：

24.Under the direct method, what will Stone find Soft Corporation's projected net change in cash to be for the year ending December 31, 2005?

A)   $9,000,000.

B)   $2,000,000.

C)   $4,000,000.

D)   $7,000,000.

The correct answer was B)

Soft Corporation's net cash flow from operations are $1.0 million, they spent $(25.0) million on PP&E, and received $26.0 million from financing activities. This makes the net change in cash $2,000,000. Note that projected cash for 2005 is 2.0 million greater than at year-end 2004.

25.John Stone, CFA, is an investment advisor specializing in the preparation of company and industry reports for high net worth customers at Learmon Brothers. Currently, Stone is preparing a report on Soft Corporation, a rapidly growing software company. The explosive growth of this company was financed primarily by an initial public offering in which 3,000,000 shares were issued at a price of $20 per share on June 27, 2004. Soft Corporation received additional capital when employee stock options for 1,000,000 shares at a price of $10 were exercised on January 1, 2005. Stone realizes the importance of cash flow on a company's financial health and would like to include a projected statement of cash flows for 2005. Soft Corporation financial statements are presented in Tables 1 and 2. Included are the projected statements for the year ending December 31, 2005.

Table 1 Soft Corporation Balance Sheets as of December 31(in millions)
		Actual 2004	Projected 2005
Cash		$24.0	$26.0
Accounts Receivable		17.0	24.0
Inventory		100.0	150.0
PP&E		100.0	125.0
Accumulated depreciation		(30.0)	(35.0)
	Total Assets	$211.0	$290.0
Accounts payable		$91.0	$101.0
Long-term debt		20.0	40.0
Common stock		80.0	90.0
Retained earnings		20.0	59.0
	Total liabilities and equity	$211.0	$290.0

Table 2 Soft Corporation Income Statement for Years Ended December 31 (in millions except per share data)
		Actual 2004	Projected 2005
Sales		$80.0	$198.0
COGS		(38.0)	(90.0)
	Gross profit	$42.0	$108.0
SG&A		(13.0)	(30.0)
Depreciation		(3.0)	(5.0)
	Operating expenses	$(16.0)	$(35.0)
Interest expense		$(4.0)	$(5.0)
Pretax Income		22.0	68.0
Income tax expense		(7.0)	(25.0)
Net income		$15.0	$43.0
EPS		$2.0	$4.3
Average shares outstanding (millions)		7.5	10.0
Dividends per share		$0.1	$0.4

Stone decides to use the direct method to compute Soft Corporation's projected operating cash collections. Using this method, which of the following is Soft Corporation's projected operating cash collections for the year ending December 31, 2005 (in millions)?

A)   1.0.

B)   198.0.

C)   224.0.

D)   191.0.

The correct answer was D)

Under the direct method, cash collections are found by subtracting the change in accounts receivable from total sales. This is done because an increase in receivables indicates sales that were made on credit. In the case of Soft Corporation, the calculation is as follows:

198.0 – (24.0 – 17.0) = 191.0

Therefore, the correct answer is 191.0. Financing activities and expenses are not included in cash collections from operating activities.