The 2017 balance sheet showed long term debt of $5.9 million, and the 2018 balan
ID: 2814815 • Letter: T
Question
The 2017 balance sheet showed long term debt of $5.9 million, and the 2018 balance sheet showed long term debt of $6.1 million. The 2018 income statement showed an interest expense of $200,000. During 2018, the company had a cash flow to creditors of $0 and the cash flow to stockholders for the year was $80,000. Suppose you also know that the firms net capital spending for 2018 was $1,440,000, and that the firm reduced its net working capital investment by $83,000.
What is the firms 2018 operating cash flow, or OCF?
Explanation / Answer
Cash flow from assets= Cash flow to creditors+ cash flow to stockholders
= 0+ 80000 = $80,000
cash flow from assets= OCF-Change in NWC- Capital expenditure
80000= OCF- (-83000)- 1440000
OCF= 80000-83000+1440000 = $1437,000
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