Question

Jetson Spacecraft Corp. shows the following information on its 2011 income statement: 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 are told that the firm issued $6,100 in new equity during 2011 and redeemed $ 4,500 in outstanding long-term debt.

a) What is the 2011 operating cash flow?

b. What is the 2011 cash flow to creditors?

c. What is the 2011 cash flow to stockholders?

d) If net fixed assets increased by $25,000 during the year , what was the addition to NWC?

Sales : $ 235,000

Costs 141,000

Other Expenses 7,900

Interest Expense 12,900

Taxes 19,565

Dividends 12,300

2011 New Equity $ 6,100

Net New Long-Term Debt (4,500)

Change in Net Fixed Assets 25,000

Income Statement ( Rewrite or calculate the given questions below using Excel)

Sales :

Costs:

Other Expenses:

EBIT:

Taxes:

Net Income:

a. Operating Cash Flow:

b. Cash Flow to Creditors

c. Cash Flow to Stockholders

d. Cash Flow from Assets

Net Capital Spending :

Change in NWC :

Answer 1

Sales : $ 235,000

Costs: $141,000

Other Expenses:$ 7,900

Interest Expense:$ 12,900

Taxes:$ 19,565

Dividends:$ 12,300

New Equity :$ 6,100

Depriciation : $17,300

Net New Long-Term Debt : $4,500

Change in Net Fixed Assets : $25,000

Cash flow statement:-

Cash flow statement means outflow or inflow of cash in business during the finacial year.it includes three activities operating activities, investment activities and fiancing activities. it involves only those transaction in which real cash is involved.

1) Operating cash flow

First have to calculate net income:

Particulars	Amount
Sale	$235,000
Less: Costs	($141,000)
Gross profit	$94,000
Less: Other expense	($7,900)
Less: Depreciation expense	($17,300)
EBIT	$68,800
Less: Interest expense	($12,900)
EBT	$55,900
Less: Tax	($19,565)
Net income	$36,335

Particular	Amount
Net income	$36,335
Add:Intrest	$12,900
Add:Depreciation	$17,300
Cash flow from operating activity	$66,535

2) Cash flow to Creditors

It represent net payment to creditor.

Particulars	Amount
Intrest paid	$12,900
Add: new long tem debt	$4,500
Cash flow to creditor	$17,400

3) Cash flow to Stakeholder

It represent the net payment to owners

Particulars	Amount
Dividend	$12,300
Less: Equity shares	($6,100)
Cash flow to stakeholder	$6,200

4) Addition to NWC

Cash flow to assets= Cash flow to creditors + Cash flow to stakeholders

= $17,400 + $6,200

= $23,600

Net capital spending = Depriciation + Additional fixed asset

=$17300 + $25000

= $42,300

Cash flow from assets = Operating cash flow - Additional NWC - Net capital spending

$23,600 = $66,535 - Additional NWC - $42,300

Additional NWC= $66,535-$42,300-$23,600

Additional NWC = $635