Question

Weiland Co. shows the following information on its 2019 income statement: sales = $155,000; costs = $81,500; other expenses = $4,800; depreciation expense = $10,500; interest expense = $8,000; taxes = $17,570; dividends = $7,400. In addition, you're told that the firm issued $3,000 in new equity during 2019 and redeemed $4,700 in outstanding long-term debt. a. What is the 2019 operating cash flow? b. What is the 2019 cash flow to creditors? c. What is the 2019 cash flow to stockholders? d. If net fixed assets increased by $20,450 during the year, what was the addition to NWC? (For all requirements, do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) Answer is complete but not entirely correct. Operating cash flow Cash flow to creditors Cash flow to stockholders Addition to net working capital $ $ $ $ 51,130 12,700 4,400 2,080 % d.

Answer 1

Solution:

a.	Operating cash flow	$          51,130
b.	Cash flow to creditors	$          12,700
c.	Cash flow to stockholders	$            4,400
d.	Addition to net working capital	$                   -

Notes:

a) Calculation of operating cashflow

Operating Cash flow:
Sales	$        155,000
Less: Costs	$        (81,500)
Other Expenses	$          (4,800)
Taxes	$        (17,570)
Total	$          51,130

b) Cash flow to creditors = Interest Expense + Debt Repayment = $8000 +$4700 = $ 12,700

c) Cash flow to stockholders = Dividend paid - Equity Issued = $ 7400 - $ 3000 =$ 4,400

d) Increase in net fixed assets does not effect the net working capital because working capital calculation is done by deducting current liabilities from current assets. As fixed assets are not considered in calculation of working capital, so it does not effect the net working capital.