etson Spacecraft Corp. shows the following information on its 2009 income statem

Question

etson Spacecraft Corp. shows the following information on its 2009 income statement: sales = $212,000; costs = $95,000; other expenses = $5,900; depreciation expense = $9,000; interest expense = $14,200; taxes = $35,160; dividends = $10,000. In addition, you're told that the firm issued $7,700 in new equity during 2009 and redeemed $9,300 in outstanding long-term debt.

(a) What is the 2009 operating cash flow?

(b) What is the 2009 cash flow to creditors?

(c) What is the 2009 cash flow to stockholders?

(d) If net fixed assets increased by $19,000 during the year, what was the addition to NWC?

Explanation / Answer

a) Operating cash flow = Sales - costs - other expenses - taxes = 212000 - 95000 - 5900 - 35160 = 75940

b) Cash flow to creditors = Interest paid + Redemption of long-term debt = 14200 + 9300 = 23500

c) cash flow to stockholders = dividends - new equity issued = 10000 - 7700 = 2300

d) net capital spending = net fixed assets increased + depreciation = 19000 + 9000 = 28000

Cash flow from assets = operating cash flow - net capital spending - changes in NWC

or, (Cash flow to creditors + cash flow to stockholders) = operating cash flow - net capital spending - changes in NWC

or, (23500 + 2300) = 75940 - 28000 - changes in NWC

or, Changes in NWC = 22140

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