Last year\'s balance sheet of Sugarpova’s Tennis Shop, Inc., showed long-term de
ID: 1170674 • Letter: L
Question
Last year's balance sheet of Sugarpova’s Tennis Shop, Inc., showed long-term debt of $6 million, and this year's balance sheet shows long-term debt of $6.4 million. The income statement shows the company paid $160,000 in interest and and $50,000 in dividends. What was the cash flow to creditors during the year? (Negative amount should be indicated by a minus sign. Enter your answer in dollars, not millions of dollars, e.g., 1,234,567.) Cash flow to creditors (CFTC) $ Does this represent a cash inflow or outflow to the firm?
Explanation / Answer
cash flow to creditors = Interest paid - Net borrowings
cash flow to creditors = $160,000 - ($6,400,000- $6,000,000)
Cash flow to creditors = -$240,000.
This represents an outflow to the firm i.e., firm is paying the creditors.
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