Exercise 1 Southeast Corporation Made Sales Of 825 Million U

Exercise 1southeast Corporation Made Sales Of 825 Million During 201

Southeast Corporation's financial activities during 2014 require thorough analysis to determine its net income and ending cash balance. The company reported sales of $825 million, with accounts receivable (cash collected for all but $27 million) and incurred various expenses, including cost of goods sold, operating expenses, and payments for inventory and other costs. This information enables us to compute key financial metrics vital for management assessment and decision-making.

Paper For Above instruction

To calculate Southeast Corporation’s net income for 2014, we begin with the sales revenue, subtract the cost of goods sold, and then subtract all other operating expenses. The calculation proceeds as follows:

  • Sales Revenue: $825 million
  • Less: Cost of Goods Sold (COGS): $255 million
  • Gross Profit: $825 million - $255 million = $570 million

Next, subtract all other expenses, which total $325 million, to determine operating income:

  • Operating Expenses: $325 million
  • Net Income: $570 million - $325 million = $245 million

Thus, Southeast Corporation’s net income for 2014 was $245 million. This figure represents the profitability of the company after accounting for all costs and expenses.

To determine the ending cash balance, we analyze cash flows. Beginning cash was $75 million. The company collected cash for nearly all sales except for $27 million, indicating that the collected cash from sales was:

  • Cash collections from sales: $825 million - $27 million = $798 million

Additional cash inflows included payments for inventory and other expenses; payments for inventory were $350 million, and other payments were $255 million, totaling:

  • Total cash outflows (excluding payments for sales): $350 million + $255 million = $605 million

The cash paid out for inventory and other expenses reduces the cash balance. The net cash flow from operations is then:

  • Net cash inflow/outflow: $798 million (cash received) - $605 million (cash paid out) = $193 million

Adding this to the beginning cash balance provides the ending cash balance:

  • Ending cash balance: $75 million + $193 million = $268 million

Therefore, the company's cash at the end of 2014 was $268 million.

In summary, Southeast Corporation reported a net income of $245 million and ended the year with a cash balance of approximately $268 million after considering cash collections and disbursements.

References

  • Brigham, E. F., & Ehrhardt, M. C. (2016). Financial Management: Theory & Practice. Cengage Learning.
  • Gibson, C. H. (2013). Financial Reporting & Analysis. South-Western College Publishing.
  • Schroeder, R. G., Clark, M. W., & Cathey, J. M. (2019). Financial Accounting Theory and Analysis. Wiley.
  • Horngren, C. T., Sundem, G. L., & Elliott, J. A. (2018). Introduction to Financial Accounting. Pearson.
  • Wild, J. J., Subramanyam, K. R., & Halsey, R. F. (2014). Financial Statement Analysis. McGraw-Hill Education.
  • Penman, S. H. (2013). Financial Statement Analysis and Security Valuation. McGraw-Hill/Irwin.
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