Weiland Co. shows the following information on its 2016 income statement: sales

Question

Weiland Co. shows the following information on its 2016 income statement: sales = $155,000; costs = $81,500; other expenses = $4,800; depreciation expense = $10,500; interest expense = $8,000; taxes = $17,570; dividends = $7,400. In addition, you're told that the firm issued $3,000 in new equity during 2016 and redeemed $4,700 in outstanding long-term debt. a. What is the 2016 operating cash flow? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) Operating cash flow $ b. What is the 2016 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 $ c. What is the 2016 cash flow to stockholders? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) Cash flow to stockholders $ d. If net fixed assets increased by $20,450 during the year, what was the addition to NWC? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) Addition to net working capital $

Explanation / Answer

Answer a.

EBIT = Sales - Costs - Other Expenses - Depreciation
EBIT = $155,000 - $81,500 - $4,800 - $10,500
EBIT = $58,200

OCF = EBIT - Taxes + Depreciation
OCF = $58,200 - $17,570 + $10,500
OCF = $51,130

Answer b.

Cash Flow from Creditors = Interest Expense - Net New Long-term Debt
Cash Flow from Creditors = $8,000 - (-$4,700)
Cash Flow from Creditors = $12,700

Answer c.

Cash Flow from Stockholders = Dividends - Net New Equity
Cash Flow from Stockholders = $4,700 - $3,000
Cash Flow from Stockholders = $1,700

Answer d.

Cash Flow from Assets = Cash Flow from Creditors + Cash Flow from Stockholders
Cash Flow from Assets = $12,700 + $1,700
Cash Flow from Assets = $14,400

Net Capital Spending = Increase in Net Fixed Assets + Depreciation
Net Capital Spending = $20,450 + $10,500
Net Capital Spending = $30,950

Cash Flow from Assets = OCF - Net Capital Spending - Change in NWC
$14,400 = $51,130 - $30,950 - Change in NWC
Change in NWC = $5,780

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