Question

Teeswater Corp. shows the following information on its 2018 statement of comprehensive income sales - $235,000: costs - $141,000: other expenses $7.900; depreciation expense = $17,300; interest expense = $12.900: taxes $19.565. dividends $12.300 In addition, you re told that the firm issued $6,100 in new equity during 2018 and redeemed $4,500 in outstanding long term debt a. What is the 2018 operating cash flow? (Omit $ sign in your response.) Operating cash flow $ 239400 b. What is the 2018 cash flow to creditors? (Omit $ sign in your response.) Cash flow to creditors SC c. What is the 2018 cash flow to shareholders? (Omit $ sien in unur response.) Cash flow to stockholders SC d. If net fixed assets increased by $25,000 during the year, what was the addition to NWC? (Omit $ sign in your response.) Addition to NWC $ TE

Answer 1

Solution:

(a) Operating Cash Flow = Net Income + Non cash expenses

Net Income = Sales - Cost - Other expenses - Depreciation - Interest - Taxes = 36335

Non cash expense = Depreciation = 17300

Therefore, Operating Cash Flow =36335 + 17300 = 53635

(b) Cash Flow to Creditors = Interest Paid + Debt Repaid

=12900 + 4500 = 17400

(c) Cash Flow to Stockholders = Dividend Paid - Net Equity Raised

= 12300 - 6100 = 6200

(d) Addition to NWC

=>Cash Flow from Asset = Operating Cash Flow - Change in NWC - Net Capital Spending

=>Cash Flow from Asset = Cash Flow to Creditors + Cash Flow to Stockholders

=17400 + 6200 = 23600

=> Net Capital Spending = Depreciation + Increase in fixed asset

= 17300 + 25000 =42300

=> Cash Flow from Asset = Operating Cash Flow - Change in NWC - Net Capital Spending

23600 = 53635 - Change in NWC - 42300

Change in NWC = -12265