Another Look at Allison Corporation,” in Financial and Managerial Accounting: The Basis for Business Decisions, 16th deed. By Williams et al. Page 616. I.
Read the case information given below, and then follow the instructions for completing the concussion activity. Case 13. 1, Another Look at Allison Corporation This case is based on the statement of cash flows for Allison Corporation, illustrated in Exhibit 13-1 of the textbook. Use this statement to evaluate the company’s ability to continue paying the current level of dividends-?$40,OHO per year. The following information also is available: a.
The net cash flows from operating activities shown in the statement are relatively normal for Allison Corporation. Net cash flows from operating activities have not varied by more Han a few thousand dollars in any of the past three years, b, The net outflow for investing activities was unusually high because the company modernized its production facilities during the year, The normal investing cash outflow is about $45,000 per year, the amount required to replace existing plant assets as they are retired.Over the long run, marketable securities transactions and lending transactions have a very small impact on Ellison’s net cash flows from investing activities, c, The net cash flows from financing activities were unusually large in he current year because of the issuance of bonds payable and capital stock. These securities were issued to finance the modernization of the production facilities. In a typical year, financing activities include only short-term borrowing transactions and payments of dividends.
2. In Discussion Forum I, post your response to the following questions.