Question

Prescott Football Manufacturing had the following operating results for 2019: sales = $30,074; cost of goods sold = $21,704; depreciation expense = $3,498; interest expense = $534; dividends paid = $841. At the beginning of the year, net fixed assets were $19,988, current assets were $3,205, and current liabilities were $3,554. At the end of the year, net fixed assets were $23,047, current assets were $4,425, and current liabilities were $3,045. The tax rate for 2019 was 24 percent.

a. What is net income for 2019?

b. What is the operating cash flow for 2019?

c. What is the cash flow from assets for 2019?

d. Assume no new debt was issued during the year. What is the cash flow to creditors for 2019?

e. Assume no new debt was issued during the year. What is the cash flow to stockholders for 2019?

Answer 1

Cash flow to creditors Cash flow to creditors = Interest-New long term debt 534 Cash flow to stockholders Cash flow to stockholders $ Income Statement Sales $30,074 Less: Costs $ 21,704 Less: Depreciation $ 3,498 EBIT $ 4,872 Less: Interest $ 534 ЕВТ $ 4,338 Less: Tax @ 24% $ 1,041 Net income $ 3,297 Less: Dividends $ 841 Addition to RE $ 2,456 = Dividends - Net new equity (1,492) =840-2332 Equity at beginning $ Equity at Ending $ 19,639 24,427 =19988+3205-3554 =23047+4425-3045 Cash flow from Assets Cash flow from Assets = CFC + CFS -$958 =-1492+534 $ 4,788 Increase in equity Less: Retained earnings $ 2,456 EBIT-Taxes+Depreciation 7,329 =4872-1041+3498 Net new equity $ 2,332 Net income Operating cash flow Cash flow from Assets Cash flow to creditors Cash flow to stockholders Operating cash flow $3,297 Operating cash flow $7,329 $958 $534 -$1,492

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