The 2017 balance sheet of Kerber’s Tennis Shop, Inc., showed long-term debt of $
ID: 2812283 • Letter: T
Question
The 2017 balance sheet of Kerber’s Tennis Shop, Inc., showed long-term debt of $1.87 million, and the 2018 balance sheet showed long-term debt of $2.21 million. The 2018 income statement showed an interest expense of $255,000. During 2018, Kerber's Tennis Shop, Inc., realized the following: Cash flow to creditors –$ 85,000 Cash flow to stockholders $ 170,000 Suppose you also know that the firm’s net capital spending for 2018 was $1,250,000, and that the firm reduced its net working capital investment by $45,000. 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.)The 2017 balance sheet of Kerber’s Tennis Shop, Inc., showed long-term debt of $1.87 million, and the 2018 balance sheet showed long-term debt of $2.21 million. The 2018 income statement showed an interest expense of $255,000. During 2018, Kerber's Tennis Shop, Inc., realized the following:
Explanation / Answer
Cash Flow from Assets:
= Cash Flow to Creditor + Cash Flow to Stockholders
= -$85,000 + $170,000
= $85,000
Cash Flow from Assets = OCF - Net Capital Spending - Change in Net Working Capital
$85,000 = OCF - $1,250,000 - (-$45,000)
OCF = $1,290,000
Hence, operating cash flow is $1,290,000
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