Question

Ritter Corporation's accountants prepared the following financial statements for year-end 2015: (Do not round intermediate calculations.) RITTER CORPORATION Income Statement 2015 Revenue $ 850 Expenses Depreciation 615 100 Net income Dividends $ $ 135 115 RITTER CORPORATION Balance Sheets December 31 2015 2014 Assets Cash $ 85 $ 65 Other current assets 190175 Net fixed assets 400 380 Total assets $ 675 $ 620 Liabilities and Equity Accounts payable Long-term debt Stockholders' equity $ 145 165 365 $ 125 150 345 Total liabilities and equity $ 620 $ 675 = a. What is the change in cash during 2015? Change in cash b. Determine the change in net working capital in 2015. Change in net working capital c. Determine the cash flow generated by the firm's assets during 2015, Cash flow from assets

Answer 1

a) Change in cash during the year 2015 = cash balance at the end of the year 2015 - cash balance at the end of the year 2014

= $85-$65

= $20

b. Change in net working capital = Working capital 2015- Working capital 2014

Working capital 2015= Current assets- Current liabilities= (cash + other current assets) - (Accounts payable)

=(85+190) - 145 = 130

Working capital 2014 = (65+175) - 125 = 115

Change in net working capital = 130-115 = $15

C. Cash flow generated by firms assets during 2015 = Cash flow from operation

Cash flow from operation=Net Income+Depreciation Expense-Increase in current assets-Decrease in Accounts payable

= $135+100-35-20

= $180

Cash flow generated by firms assets during 2015 = $180