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The comparative balance sheet for company “Delta” in € for years2017 and 2018 is
given below:

Comparative Balance Sheet of “Delta”
Assets	2018	2017	Liabilities & Stockholders' Equity	2018	2017
Fixed assets: Property, plant & equipment Less accumulated depreciation Net property, plant and equipment Long-term investments Total fixed assets Current assets: Cash and cash equivalents Marketable securities Accounts receivables Inventory Total current assets Total current assets	1,900,000 (600,000) 1,300,000 85,000 1,385,000 100,000 175,000 235,000 290,000 800,000 2,185,000	1,600,000 (450,000) 1,150,000 105,000 1,255,000 65,000 175,000 240,000 230,000 710,000 1,965,000	Stockholders' equity: Common stock Retained earnings Total stockholders' equity Long-term liabilities: Long-term debt Total long-term liabilities Current liabilities: Accounts payable Notes payable Accrued Expenses Taxes Payable Wages Payable Other current liabilities Total current liabilities Total liabilities Total liabilities & stockholders' equity	350,000 700,000 1,050,000 950,000 950,000 90,000 30,000 20,000 20,000 10,000 15,000 185,000 1,135,000 2,185,000	400,000 550,000 950,000 750,000 750,000 120,000 80,000 40,000 10,000 5,000 10,000 265,000 1,015,000 1,965,000

The income statement of company “Delta” for 2018 is also givenbelow:

Income Statement of “Delta” for 2018
Sales Cost of goods sold Gross margin Selling and administrative expenses Wages Depreciation expense Net operating income Interest expense Income before taxes Income taxes Net income	6,500,000 (4,500,000) 2,000,000 (550,000) (50,000) (150,000) 1,250,000 (150,000) 1,100,000 (500,000) 600,000

Required:
1. Prepare the cash flow statement using the indirect method. Foryour answer you
need to consider that company “Delta” has repurchased shares and ithas
decreased respectively its share capital. (20%).
2. Which is the dividend payout ratio for “Delta” for year 2018? Ifthe company
increases the dividend payout ratio by 10%, what would the effectbe to the
retained earnings? (5%)
3. Is the increase of the dividend payout ratio a good signal andwhat is the impact
on the free cash flows? What do you think that an analyst shouldconsider when

the dividend payout ratio increases? (max: 200 words) (5%)
4. What inferences can you draw from the analysis of “Delta” cashflows? Explain
briefly (max: 300 words) (10%)