Question

Graffiti Advertising, Inc., reported the following financial statements for the last two years 2016 Income Statement Sales Costs of goods sold Selling and administrative Depreciation EBIT Interest EBT Taxes Net income Dividends Addition to retained earnings $565,700 274,020 124,732 54,575 $112,373 19,318 $ 93,055 37,222 $ 55,833 $ 9,700 $ 46,133 GRAFFITI ADVERTISING, INC Balance Sheet as of December 31, 2015 Cash Accounts receivable Inventory Current assets $ 13,330 Accounts payable $ 9,503 14,507 $ 24,010 18,993 $ 46,118 S344,456 $390,574 Notes payable 13,795 Current liabilities Long-term debt Owner's equity $136,720 $229,844 $390,574 Net fixed assets Total assets Total liabilities and owners' equity GRAFFITI ADVERTISING, INC Balance Sheet as of December 31, 2016 $ 10,513 16,467 $ 26,980 $ 14,316 Accounts payable Cash Accounts receivable Inventory Current assets 21,098 Notes payable 22,755 Current liabilities 58,169 $152,100 $285,399 $464,479 Long-term debt Net fixed assets Total assets $406,310 Owner's equity $464,479 ollabilities and owners' equity

Answer 1

a) Cash Flow from Operations = EBIT - Taxes + Depreciation = 112373 - 37222 + 54,575 = 129726

b) Change in Net Working Capital = (Net working capital in 2016 - Net working capital in 2015) = (58169- 26980) - (46118 - 24010) =9081

c) Net capital spending = Total Long term debt in 2016 - Long term debt in 2015 = 152100 - 136720 = 15380

d) Cash flow From assets = Cash flow From Operations - Change in NWC - Change in Capital Spending = 129726 - 9081
- 15380 = 105,265