Question

Weiland Co. shows the following information on its 2014 income statement: sales $156,500; costs $81,200, other expenses-$4,500; depreciation expense = $10,200; interest expense = $7,700, taxes = $18,515, dividends = $7,550. In addition, you're told that the firm issued $3,300 in new equity during 2014, and redeemed $5,300 in outstanding long-term debt. (Enter your answer as directed, but do not round intermediate calculations.) Required (a) What is the operating cash flow during 2014? Operating cash flow 52285 (b) What is the cash flow to creditors during 2014? Cash flow to creditors (c) What is the cash flow to stockholders during 2014? Cash flow to stockholders (d) Assuming net fixed assets increased by $20,600 during the year, what was the addition to NWC? 4235 Addition to net working capital

Answer 1

Answer to Requirementa Income Statement Sales 156,500 81,200 Costs Other Expenses 4,500 10,200 Depreciation EBIT 60,600 7,700 Interest Taxable Income 52,900 Taxes 18,515 Net Income 34,385 Operating Cash Flow EBIT - Taxes Depreciation Operating Cash Flow $60,600 $18,515$10,200 Operating Cash Flow $52,285

Answer to Requirement b.
Cash flow to creditors = Interest paid – Net new borrowing
Cash flow to creditors = $7,700 – (-$5,300)
Cash flow to creditors = $13,000

Answer to Requirement c.
Cash flow to stockholders = Dividends paid – Net new equity
Cash flow to stockholders = $7,550 - $3,300
Cash flow to stockholders = 4,250

Answer to Requirement d.
Addition NWC = Increase in Net Fixed Assets – Increase in Retained Earnings – Issue of Equity + Redemption of Debt

Increase in Retained Earnings = Net Income – Dividend
Increase in Retained Earnings = $34,385 - $7,550
Increase in Retained Earnings = $26,835

Addition NWC = $20,600 - $26,835 - $3,300 + $5,300
Addition NWC = -$4,235