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1.   How does the statement of cash flows add to the analyst’s perspective about a company? Remember to include the free cash flows in your responses.

2.   Financial ratios by themselves cannot determine whether or not a firm’s stock or bond is a good buy. Explain and give examples to demonstrate clarity to your responses.




2. A firm has the following items on its balance sheet: Cash $ 20,000,000 Inventory 134,000,000 Notes payable to bank 31,500,000 Common stock ($10 par; 1,000,000 shares outstanding) 10,000,000 Retained earnings 98,500,000
Describe how each of these accounts would appear after the following: a) A cash dividend of $1 per share b) A 10 percent stock dividend (fair market value of stock is $13 per share) c) A 3-for-1 stock split d) A 1-for-2 reverse stock split

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