Zigs Industries had the following operating results for 2011: sales = $28,560; c
ID: 2418670 • Letter: Z
Question
Zigs Industries had the following operating results for 2011: sales = $28,560; cost of goods sold = $19,460; depreciation expense = $5,020; interest expense = $2,340; dividends paid = $1,150. At the beginning of the year, net fixed assets were $16,980, current assets were $5,800, and current liabilities were $3,280. At the end of the year, net fixed assets were $20,360, current assets were $7,360, and current liabilities were $3,900. The tax rate for 2011 was 30 percent.
If no new debt was issued during the year, what is the cash flow to creditors?
If no new debt was issued during the year, what is the cash flow to stockholders? (Negative amount should be indicated by a minus sign.)
Zigs Industries had the following operating results for 2011: sales = $28,560; cost of goods sold = $19,460; depreciation expense = $5,020; interest expense = $2,340; dividends paid = $1,150. At the beginning of the year, net fixed assets were $16,980, current assets were $5,800, and current liabilities were $3,280. At the end of the year, net fixed assets were $20,360, current assets were $7,360, and current liabilities were $3,900. The tax rate for 2011 was 30 percent.
Explanation / Answer
a. Net Income =Sales-cost of goods sold-interest expense-depreciation expense- tax expense
=28,560-19,460-2,340-5,020-522
=$ 1,218
b. Operating Cash flow=Net Income +Tax expense +depreciation + interest expense
=1,218+522+5,020+2,340
= $ 9,100
c. Cash flow from assets = Increase in fixed assets + Increase in current asset
= [net fixed assets at the beginning of the year-net fixed assets at the end of the year]+[ net current assets at the beginning of the year- net current assets at the end of the year]
= [16,980-20,360] + [5,800-7,360]
= -3,380-1,560
= $ -4,940
If no new debt was issued during the current year, cash flow to the creditors=
= Opening creditors + Cost of goods sold- closing creditors
= 3,280+19,460-3,900
= $ 18,840
if no new debt was issued during the year, then cash flow to stockholders=
= Operating Cash flow +Net cash flow from assets + increse in Liabilities- interest paid during the year -dividend paid during the year- income taxes paid
= 9,100 -4,940 +6,20-2,340-1,150-522
= $ 768
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