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CH 1. Financial statements The Davidson Corporation's balance sheet and income statement are provided here: Davidson Corporation Balance Sheet as of December 31, 2008 (Millions of Dollars) Assets Liabilities and Equity Accounts payable Cash and equivalents $ 100 $ 100 500 Notes payable 200 800 Accruals 300 Accounts receivable Inventories Total current assets Net plant and equipment 1,400 Total current liabilities 600 Long-term bonds 2.600 200 Total debt 1,300 Common stock 300 1.400 (100 million shares Retained earnings Common equity Total liabilities and equity 1.700 Total assets 3.000 3.000 Davidson Corporation Income Statement for Year Ending December 31, 2008 (Millions of Dollars) Davidson Corporation: Income Statement for Year Ending December 31, 2008 (Millions of Dollars) Sales $6,000 Operating costs 5.000 EBITDA 1,000 Depreciation and amortization 200 EBIT 800 Interest 1 200 EBT 600 Taxes (50%) 300 Net Income 300 Common dividends paid 150 Earnings per share 3.00 a. Construct the statement of stockholders equity for December 31, 2008. Retained earnings for December 31, 2007 equaled $1,250 b.How much money has been reinvested in the firm over the years? c.At the present time, how large a check could be written without it bouncing? d. How much money must be paid to current creditors within the next year? 2. Balance sheet Type (1,2, 3, or 4) the following action that will always Increase cash as shown on a firm's balance sheet 1. It issues $2 million of new common stock. 2. It buys new plant and equipment at a cost of $3 million 3. It reports a large loss for the year. 4. It increases the dividends paid on its common stock

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