Question

Use the following information for Ingersoll, Inc. Assume the tax rate is 24 percent. Sales Depreciation Cost of goods sold Other expenses Interest Cash Accounts receivable Short-term notes payable Long-term debt Net fixed assets Accounts payable Inventory Dividends 2018 2019 $ 18,549 $ 18,888 2,416 2,524 5,890 6,771 1,371 1,198 1.130 1.345 8,696 9,367 11,528 13,602 1,714 1,681 29,180 35,329 72.861 77.730 6,293 6,760 20,492 21,902 2,1792,354 For 2019, calculate the cash flow from assets, cash flow to creditors, and cash flow to stockholders. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Cash flow from assets Cash flow to creditors Cash flow to stockholders

Answer 1

Solution

Ingersoll Inc

Calculation of cash flow from assets:

Cash flow from assets = operating cash flow +/– changes in net working capital +/- changes in fixed assets

Operating cash flow = $3,704

Changes in net working capital = ($3,050)

Changes in fixed assets = (77,730 – 72,861) = $4,869

Cash flow from assets = 3,704 – 3,050 – 4,869 = ($4,215)

Cash flow to creditors:

Cash flow to creditors = interest – changes in long-term debt

Interest for 2019 = $1,345

Changes in long term debt = (35,329 – 29,180) = $6,149

Cash flow to creditors = 1,345 – 6,149 = ($4,804)

Cash flow to stockholders:

Cash flow to stockholders = dividends paid = $2,354

Computations:

Income statement for the year 2019:–

Sales               $18,888

Cost of goods sold $6,771

Gross margin $12,117

Less: operating expenses        $1,198

Depreciation               $2,524

Interest                        $1,345

income before tax       $7,050

income tax at 40%      $2,820

After tax income         $4,230

Operating cash flow:

Operating cash flow:
net income		$4,230
adjustments to reconcile net income to net cash flow from operations:
Add: depreciation	$2,524
Less: increase in accounts receivable	($2,074)
Less: increase in inventory	($1,410)
decrease in short term notes payable	($33)
Add: increase in accounts payable	$467	($526)
cash flow from operating activities		$3,704

Changes in net working capital = - (13,602 – 11,528) + (1,681 – 1,714) + (6,760 – 6,293) – (21,902 – 20,492) = ($3,050)