Question

1) A junior staff member has provided you with the following balance sheet information for 2014 & 2015 along with income statement information for 2015 2014 $1,000 Catego 2015 $1,200 5,600 800 600 3,300 Cate 2015 S10,000 $4,800 $0 $1,200 30% Sales Cost of Goods Sold Interest Expense Current Assets 5,000 600 Net Fixed Assets Accounts Payable Accrued Expenses Long-term Debt 500 3,000 Depreciation Tax Rate a) Calculate Net Working Capital for 2015 b) Calculate the Operating Cash Flow for 2015 c) Calculate the Free Cash Flow for 2015 d) Clearly the junior staffer left out a critical element of the balance sheet for 2014 & 2015. What was left out and what must it be equal to in 2014 & 2015?

Answer 1

Net working capital=Current assets-Current Liabilities

          =$1200-($800+ $600)=-200

Operating cash flow= Net income+non cash expenses+changes in the working capital

                  =   $2800+$1200 +(-100-{-200)}= $2800+$1200+$100= $ 4100

Free cash flow=Net Inc0me+ non cash expenses-increase in working capital-capital expenditure

     =$ 2800+$ 1200-$600=$ 3400

The element that is left out is the stockholder’s equity and its value in 2014 is $4900 and in $ 54002015