Question

Cardinal Industries had the following operating results for 2018: Sales = $34,015; Cost of goods sold = $24,065; Depreciation expense = $5,967; Interest expense = $2,695; Dividends paid = $1,969. At the beginning of the year, net fixed assets were $19,910, current assets were $7,033, and current liabilities were $3,974. At the end of the year, net fixed assets were $24,475, current assets were $8,666, and current liabilities were $4,646. The tax rate for 2018 was 24 percent.

  

a.	What is net income for 2018? (Do not round intermediate calculations.)
b.	What is the operating cash flow for 2018? (Do not round intermediate calculations.)
c.	What is the cash flow from assets for 2018? (Do not round intermediate calculations. A negative answer should be indicated by a minus sign.)
d-1.	If no new debt was issued during the year, what is the cash flow to creditors? (Do not round intermediate calculations.)
d-2.	If no new debt was issued during the year, what is the cash flow to stockholders? (Do not round intermediate calculations. A negative answer should be indicated by a minus sign.)

  

Answer 1

a. the net income for 2018 is :

SALES : $34,015

COGS : $24,065

DEPRECIATION : $5967

EBIT : $3983

INTEREST : $2695

EBT : $1288

TAXES : $309.12

NET INCOME : $978.88

The net income for 2018 is $978.88

= $978.88( ROUNDED OFF)

b. OCF = EBIT - TAXES + DEPRECIATION

= $3983 -$309.12 + $5967

=$9640.88

= $9640.88

C. CASH FLOW FROM ASSETS = OCF - CHANGE IN NWC - CHANGE IN FIXED ASSETS

CHANGE IN NWC = (END OF CURRENT ASSETS - CURRENT LIABILITIES ) - (BEGINNING OF CURRENT ASSETS - CURRENT LIABILITIES)

=( $8666 - $4646) - ($7033 - $3974)

=$4020 - $3059

=$961

CHANGE IN FIXED ASSETS :

END OF FIXED ASSETS - BEGINNING OF FIXED ASSETS + DEPRECIATION

= ($24,475 - $19,910) + $5967

=$10,532

CASH FLOW FROM ASSETS = OCF - CHANGE IN WORKING CAPITAL - CHANGE IN FIXED ASSETS

= $9640.88- $961 - $10,532

=- $1852.12

D1. Cash flow to creditors = interest paid - net new long term debt

since, no new debt has been raised,

cash flow to creditors = $2,695

D2. Cash flow to stock holders = dividends paid - net new equity raised

=$1,969 - net new equity raised

CFFA = cash flow to creditors +( cash flow to stock holders)

-$1852.12 = $2,695 + ($1,969 - net new equity raised)

cash flow to stock holders = -$4,547.12