Use the data from the following financial statements shown below. The company pa
ID: 2658350 • Letter: U
Question
Use the data from the following financial statements shown below. The company paid interest expense of $17,600 for 2014 and had an overall tax rate of 40% for 2014. Find the cash flow from assets for? 2014, and break it into its three? parts: operating cash? flow, capital? spending, and change in net working capital.
Partial Income Statement Year Ending 2014 Sales revenue Cost of goods sold Fixed costs Selling, general, and administrative expenses Depreciation $349,900 $142,000 $43,100 $28,200 $46,200Explanation / Answer
a- Operating Cash Flow = EBIT + Depreciation - Taxes.
EBIT = Sales - COGS - Fixed Costs - Selling, General & Administrative expenses - Depriciation
= 349,900 - 142,000 - 43,100 - 28,200 - 46,200
= 89,500
EBT = EBIT - Interest Expense = 89,500 - 17,600 = $71,900
Tax = 71,900 +40% = 28,760
Operating Cash Flow = 89,500 +46,200 - 28,760
= $106,940
b- Capital Spending = Ending Net Fixed Assets - Beginning Net Fixed Assets + Depreciation
Beginning Fixed Assets = Fixed Assets (2013) = 368,100
Ending Fixed Assets = Fixed Assets (2014) = $448,000
Capital Spending = 448,000 - 368,100 +46200
= $126,100
c- Change in Net Working Capital = Ending NWC (2014) - Beginning NWC (2013)
NWC = CA - CL
NWC 2014 = CA (Cash + Accounts Receivables + Inventories) - CL (Notes Payable + Accounts Payable)
= (26,000 + 19,000 + 52,900) - (11,900 +23,800)
= 97,900 - 35,700 = 62,200
NWC (2013) = (16,200 +28,200 +47,800) - (14,200 +18,800)
= 92,200 - 33,000 = 59,200
Change in Net Working Capital = 62,200 - 59,200 = 3,000
Cash Flow From Assets = Operating Cash Flow - Net Capital Spending - Change in NWC
= 106,940 - 126,100 - 3000
= - 22,160
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