Graffiti Advertising, Inc., reported the following financial statements for the

Question

Graffiti Advertising, Inc., reported the following financial statements for the last two years.
  

a. Calculate the operating cash flow. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
  
Operating cash flow            $
  
b. Calculate the change in net working capital. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
  
Change in net working capital            $
  
c. Calculate the net capital spending. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
  
Net capital spending            $
  
d. Calculate the cash flow from assets. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
  
Cash flow from assets            $

e. Calculate the cash flow to creditors. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
  
Cash flow to creditors            $

f. Calculate the cash flow to stockholders. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
  
Cash flow to stockholders            $

2016 Income Statement Sales $ 572,200 Costs of goods sold 273,955 Selling and administrative 124,719 Depreciation 54,562 EBIT $ 118,964 Interest 19,604 EBT $ 99,360 Taxes 39,744 Net income $ 59,616 Dividends $ 11,000 Addition to retained earnings $ 48,616

Explanation / Answer

a.Operating cash flow

= EBIT+ Depreciation+Taxes

              = $118,964+ $54,562+ $37,744= $211,270.

b.Change in net working capital

= Net working capital in 2006- Net working capital in 2005

=(Current assets-current liabilities in 2006)-(Current assets-current liabilities in 2005)

=($58,299-$27,006)-($46,248-$23,984)

=$31,223- $22,264= $8,959.

c.Net capital spending

= Net fixed assets in 2006- Net fixed assets in 2005+ Depreciation

=$406,297-$344,846+ $54,562= $116,013.

d.Cash flow from assets

= Operating cash flow- Change in net working capital- Net capital spending

=$211,270-$8,959- $116,013= $86,298.

e.Cash flow to creditors

=Interest paid-(long term debt in 2006- long term debt in 2005)

=$19,604-($153,400-$135,680)

=$19,604-$17,720= $1,884

f.Cash flow to stockholders

In order to calculate cash flow from stockholders, we need to find new equity sold.

New equity sold=(Ending equity balance- Beginning equity balance)- Addition to retained earnings

=($284,140-$231,430)- $48,616

=$52,710-$48,616= $4,094.

Cash flow to stockholders= Dividendd paid- New equity issued

=$11,000-$4,094= $6,906.

I hope that was helpful :)

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