Calculate operating cash flow, change in net working capital, net capital spending, cash flow to creditors and cash flow to stockholders. Does the cash flow identity hold?
Homework Answers
a)Operating Cash flow = EBIT +Depreciation -Taxes
= 170000 +30000 - 69750
= 130250
b)Change in net working capital : Working capital at 2018 - working capital at 2017
= 0 -0
= 0
| 2018 | 2017 | |
| Current asset | 80000 | 75000 |
| Less:current liabilities | -80000 | -75000 |
| Working capital | 0 | 0 |
c)
Net Capital spending = Net fixed asset at end +Depreciation -Net fixed asset at beginning
= 393750 + 30000 - 375000
= 48750
d)Cash flow to creditors = Interest expense -[Long term debt at end -Long term debt at beginning]
= 15000 - [89250 - 85000]
= 15000 - 4250
= 10750
e)Cash flow to stockholders = Dividend paid -[Equity at end -Equity at beginning]
= 73750 - [304500 - 290000]
= 73750 - 14500
= 59250
**Dividend paid =Accumulated earnings at 2017+ net income - accumulated earnings at beginning
= 230000 +85250 -241500
= 73750
f)Cash flow from asset = Operating cash flow -net change in working capital -net capital spending
= 130250 - 0 - 48750
= 81500
AS per equation Cash flow from asset =cash flow to creditors + cash flow to stockholders
= 10750+ 59250
= 70000
Since 81500 is not equals to 70000,the cash flow identity does not hold .
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