Financial Cash flow and statement of cash flows You are researching Time Manufac

ID: 1171311 • Letter: F

Question

Financial Cash flow and statement of cash flows

You are researching Time Manufacturing and have found the following accounting statement of cash flows for the most recent year. You also know that the company paid $84 million in current taxes and had an interest expense of $41 million.

(1) Use the information above: interest expenses, current tax and statement of cash flow to compute financial cash flow (hint: please first calculate cash flows from three parts and then sum them)

(2) Based on Statement of cash flow, please calculate the cash flow for shareholders and cash flow for debtholders. Based on Calculation, write down the equation about Cash flow for different stakeholders.

Statement of Cash flows(units.million) Operation Net income Depreciation Deferred Taxes Change in Assets and labilities 192 76 13 -16 17 13 -7 Acccounts receivable Accounts payable Accrued Expenses Other Total cash flow from operation Investing activities Acquisition of fixed assets Sale of fixed assets Total cash flow from investing activities Financing Activities Retirement of long-term debt proceeds from long-term debt sales change in notes payable Dividends Repurchase of stoclk Proceeds from long-term debt sales Total cash flow from financing activities change in cash(balance sheet) 290 -198 21 150 115 -81 43 -76 37

Explanation / Answer

In the financial statement of cash flows, since interest expense is considered as a financing activity, interest expenses would have been shown under cash flows from financing activities.

Operations

Net Income

$192

Interest

$41

Depreciation

$76

Deferred taxes

$13

Changes in assets and liabilities

Accounts receivables

-$16

Inventories

$17

Accounts payables

$13

Accrued expenses

-$7

Other

Total cash flow from operations

$331

Investing activities

Acquisition of fixed assets

-$198

sales of fixed assets

$21

Total cash flow from investing activities

-$177

Financing activities

Interest expense

-$41

Retirement of long term debt

-$150

proceeds from long term debt sales

$115

change in notes payable

Dividends

-$81

repurchase of stock

-$11

Proceds from new stock issue

$43

Total cash flow from financing activities

-$117

Change in cash (-117-177+331)

$37