Question

Ritter Corporation’s accountants prepared the following financial statements for year-ends.

  

RITTER CORPORATION
Income Statement
2017
Revenue	$	1,095
Expenses		765
Depreciation		100
EBT	$	230
Taxes		92
Net income	$	138
Dividends	$	41

   

RITTER CORPORATION
Balance Sheets
December 31
		2016			2017
Assets
Cash	$	72		$	95
Other current assets		226			265
Net fixed assets		720			829
Total assets	$	1,018		$	1,189
Liabilities and Equity
Accounts payable	$	278		$	292
Long-term debt		0			60
Stockholders’ equity		740			837
Total liabilities and equity	$	1,018		$	1,189

a. What is the change in cash during the year 2017. (Do not round intermediate calculations.)

Change in cash             $

b. Determine the change in net working capital in 2017. (Do not round intermediate calculations.)

Change in net working capital             $

c. Determine the cash flow generated by the firm’s assets during the year 2017. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations.)

Cash flow from assets             $

Answer 1

a). Change in Cash during the 2017 = cash balance at the end of the year 2017 - cash balance at the end of the year 2016

= $95 - $72 = $23

b). Change in NWC = NWC(end) - NWC(beg)

= [CA(end) - CL(end)] - [CA(beg) - CL(beg)]

= [($95 + $265) - $292] - [($72 + $226) - $278]

= $68 - $20 = $48

c). OCF = Net Income + Depreciation = $138 + $100 = $238

Capital Spending = Ending Net Fixed Assets - Beginning Net Fixed Assets

= $829 - $720 = $109

Cash Flow from Assets = OCF - Capital Spending - Change in NWC

= $238 - $109 - $48 = $81