Question

Blue Diamond Industries had the following operating results for 2017: sales = $28,560; cost of goods sold = $19,460; depreciation expense = $5,020; interest expense = $2,340; dividends paid = $1,150. At the beginning of the year, net fixed assets were $16,980, current assets were $5,800, and current liabilities were $3,280. At the end of the year, net fixed assets were $20,360, current assets were $7,360, and current liabilities were $3,900. The tax rate was 30 percent.

a. What was net income for 2017? (Do not round intermediate calculations.)

Net income             $

b. What was the operating cash flow for 2017? (Do not round intermediate calculations.)

Operating cash flow             $

c. What was the cash flow from assets for 2017? (Do not round intermediate calculations. A negative answer should be indicated by a minus sign.)

Cash flow from assets              $

d-1 If no new debt was issued during the year, what was the cash flow to creditors? (Do not round intermediate calculations.)

Cash flow to creditors             $

d-2 If no new debt was issued during the year, what was the cash flow to stockholders? (Do not round intermediate calculations. A negative answer should be indicated by a minus sign.)

Cash flow to stockholders             $

Answer 1

Cash flow to creditors Cash flow to creditors = Interest-New long term debt $ 2,340 Cash flow to stockholders Cash flow to stockholders $ Income Statement Sales $ 28,560 Less: Costs $ 19,460 Less: Depreciation $ 5,020 EBIT $ 4,080 Less: Interest $ 2,340 EBT $ 1,740 Less: Tax @ 30% $ 522 Net income $ 1,218 Less: Dividends $ 1,150 Addition to RE $ 68 = Dividends - Net new equity (3,102) =1150-4252 Equity at beginning $ Equity at Ending $ 19,500 | =16980+5800-3280 23,820 =20360+7360-3900 Cash flow from Assets Cash flow from Assets = CFC + CFS -$762 =-3102+2340 $ 4,320 Increase in equity Less: Retained earnings $ 68 EBIT-Taxes+Depreciation 8,578 $ =4080-522+5020 Net new equity $ 4,252 Net income Operating cash flow Cash flow from Assets Cash flow to creditors Cash flow to stockholders Operating cash flow $1,218 Operating cash flow $8,578 $762 $2,340 -$3,102

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