mework Saved The 2017 balance sheet of Kerber\'s Tennis Shop, Inc, showed long-t

Question

mework Saved The 2017 balance sheet of Kerber's Tennis Shop, Inc, showed long-term debt of $6.1 million, and the 2018 balance sheet showed long-term debt of $6.3 million. The 2018 income statement showed an interest expense of $210,000. During 2018, the company had a cash flow to creditors of $10,000 and the cash flow to stockholders for the year was $65,000. Suppose you also know that the firm's net capital spending for 2018 was $1,460,000, and that the firm reduced its net working capital investment by $87000. What was the firm's 2018 operating cash flow, or OCF? (Enter your answer in dollars not millions of dollars, e.g., 1,234,567.) Operating cash flow

Explanation / Answer

The Cash Flow Identity is:

CF from Assets = CF to Creditors + CF to Stockholders

CFFA = $10,000 + $65,000 = $75,000

CFFA = Operating Cash Flow - Capital Spending - Additions to NWC

$75,000 = OCF - $1,460,000 - (-$87,000)

OCF = $75,000 + $1,373,000 = $1,448,000

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