Use the following financial statement information for Computron Corporation to a
ID: 2594734 • Letter: U
Question
Use the following financial statement information for Computron Corporation to answer parts (a) and (b) of this question.
What is the working capital requirement (WCR) for Computron Corporation in 2015 and 2016? Show your calculations.
What is Computron’s net operating cash flow (NOCF) for 2016? Show your calculations.
What is Computron’s free cash flow (FCF) for 2016? Show your calculations.
Computron Corporation
Income Statement (in millions)
2015
2016
Net Sales
$1,000
$1,200
Cost of Goods Sold
710
900
Selling, General and Administrative Expenses
140
120
Depreciation Expense
25
30
Earnings Before Interest and Tax
125
150
Net Interest Expense
20.2
21.7
Earnings Before Tax
104.8
128.3
Income Tax Expense
41.9
51.3
Earnings After Tax
$62.9
$77
Dividends
4.4
60.5
Computron Corporation
Balance Sheet (in millions)
12/31/2015
12/31/2016
Cash
$10
$12
Accounts Receivable
150
180
Inventories
200
180
Prepaid Expenses
20
23
Net Fixed Assets[1]
250
300
Total Assets
$630
$695
Short Term Debt
$71.5
$90
Accounts Payable
90
108
Accrued Expenses
60
72
Long-Term Debt
150
150
Owners’ Equity
258.5
275
Total Liabilities and Owners’ Equity
$10,250
$7,950
[1][1] The company did not sell any fixed assets in 2015 and 2016.
2015
2016
Net Sales
$1,000
$1,200
Cost of Goods Sold
710
900
Selling, General and Administrative Expenses
140
120
Depreciation Expense
25
30
Earnings Before Interest and Tax
125
150
Net Interest Expense
20.2
21.7
Earnings Before Tax
104.8
128.3
Income Tax Expense
41.9
51.3
Earnings After Tax
$62.9
$77
Dividends
4.4
60.5
Explanation / Answer
(a) Net operating cash flows : $142.50 milion
Workings:
(b) Free cash flow : $87.50 million
( $ millions) Cash flow from operations: Net income for the year 77.00 Adjustments for cash flows: Depreciation 30.00 Accounts receivable (150-180) -30.00 Inventories (200-180) 20.00 Prepaid expenses (20-23) -3.00 Short term debt (90.00-71.50) 18.50 Accounts payable (108-90) 18.00 Accrued expenses (72-60) 12.00 Net cash flow from operations 142.50Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.