Cusic Industries had the following operating results for 2017: sales - $20,800;

Question

Cusic Industries had the following operating results for 2017: sales - $20,800; cost of goods (16%) sold-$14,500; depreciation expense = $2,900; interest expense = $690; dividends paid- $660. At the BEGINNING of the year, net fixed assets were S15,470, current assets were $4,630 (including $1,000 cash), and current liabilities were $2,520. At the END of the year, net fixed assets were $17,120, current assets were S5,345 (including $800 cash), and current liabilities were $2,785. The tax rate for 2017 was 34 percent. (a)Calculate the cash flow from assets for the fiscal year of 2017. If no new long-term debt was issued during the fiscal year, calculate the cash flow to creditors, and then calculate the cash flow to stockholders. Also, calculate the amount of equity that Cusic Industries issued/repurchased (circle one) during the fiscal year. (c)Determine the change in EACH of the following balance sheet items as a source or use of cash for the fiscal year of 2017. (i) Cash Current Liabilities (ii) (iii) Common Stock & Paid-in Capital

Explanation / Answer

(a) cash flow from assets for the fiscal year of 2017 Change in net operating working capital = Ending net Operating Working capital   - Beginning net Operating Working capital Change in net operating working capital = ($5345 -$2785) - ($4630 -$2520) =$2560-$2110 =$450 Net capital Spending = (Ending Fixed assets - Beginning Fixed Assets) + Depreciation Net capital Spending = ($17120 -15470) +$2900 =$1650+$2900 =$4550 Cash flow from assets = Operating Cash flow - Change in Net Working Capital - Net capital spending Operating cash flow = EBIT + Depreciation - (EBIT * Tax rate) Operating cash flow = ($20800 - $14500 -$2900) +$2900 - (($20800 - $14500 -$2900)*34%) Operating cash flow = $3400 +$2900 +$1156 =$7456 Cash flow from assets =$7456 - $450 -$4550 =$2456 (b) Computation of Cash flow to the Creditor and Cash flow to the Share holders Cash flow to the creditors =Interest expense - Net new Long term Debt =$690- $0 =$690 Cash flow to the share holders =Dividends - Net new equity raised = $660 - Net New equity raised cash flow from Assets = cash flow to the stock holders + cash flow to Creditors $2456 =$660 - Net New equity raised +$690 Net new equity raised =$2456-$660-$690 =$1106 © Determine the change in each of the following balance sheet items as a source or use of cash for the fiscal year of 2017 Source/ Use of Cash (i) Cash Use of cash because the cash balance is decresed from $1000 to $800 (ii) Current Liabilities Source of cash Because current Liabiliites Incresed from $2520 to $2785 (cash generated) (iii) Common Stock & paid Up capital Source of cash because , New capital is issued

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