The 2010 balance sheet of Marias Tennis Shop, Inc., showed long-term debt of $2.

Question

The 2010 balance sheet of Marias Tennis Shop, Inc., showed long-term debt of $2.3 million, and the 2011 balance sheet showed long-term debt of $2.55 million. The 2011 income statement showed an interest expense of $190,000. During 2011, Marias Tennis Shop, Inc., had a cash flow to creditors of $60,000 and the cash flow to stockholders for the year was $105,000. Suppose you also know that the firms net capital spending for 2011 was $1,300,000, and that the firm reduced its net working capital investment by $55,000. What was the firms 2011 operating cash flow?

Explanation / Answer

Operating Cash Flow (OCF) = 1,290,000 Cash Flow from Assets (CFFA) = Cash Flow to Creditors + Cash Flow to Stockholders CFFA = 105,000 + (-60,000) CFFA = 45,000 CFFA = Operating Cash Flow - Net Capital Spending - Change in Net Working Capital 45,000 = OCF - 1,300,000 - (-55,000) 45,000 = OCF - 1,245,000 1,290,000 = OCF

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