Question

Sales COGS Depreciation Interest Tax rate 2018 $ 740 430 250 33 2019 $ 785 460 210 35 35% 35% Dividends 16 17 75 Cash Accounts receivables Inventory Net fixed assets Current liabilities Long-term debt Common stock 70 563 662 1,680 390 340 700 502 640 1,413 405 410 235

Answer 1

1. working capital of 2019

current assets - current liabilities

(cash + accounts recievables + inventory) - CL

(75+502+640) - 405 = $812

2. change in working capital

working capital of 2018

formula as above

(70 + 563 + 662 ) - 390 = $905

change in WC = WC in 2019 - WC in 2018

812 - 905 = -$93

working capital is decreased by $93

3. net capital spending for 2019

fixed assets at the end - FA in beginning + depreciation

(1413 - 1680 + 210 ) = -$57

4. operating cash flow for 2019

EBIT - change in WC + depreciation - tax

(785 - 460) -57 + 210 - (80 * 35%) *

*tax is calculated on net income EBIT - depreciation - interest

=$414 operating cash flow of 2019

5. cash flow of 2019

operating cash flow - CAPEX( capital expenditure)

414 - (-57) = $471 is cash flow of 2019

6. net new borrowings

ending long term debt - beginning long term debt

(410 - 340 ) = $70 is net new borrowings

7. cash flow to creditors

interest paid - net new borrowings

35 - 70 = -$35 cash flow to creditors

8. cash flow to stockholders

dividend paid - new equity raised

17 - (235 - 700) = $482 cash flow to stockholders