You are given the following information: 2018 Sales $23,000 Cost of goods sold $
ID: 2817966 • Letter: Y
Question
You are given the following information: 2018
Sales
$23,000
Cost of goods sold
$16,000
Depreciation expense
$4,000
Interest
$1,800
Dividends
$1,300
Tax rate
35%
New debt issuance
$2,000
2017
2018
Current assets
$4,800
$5,900
Current liabilities
$2,700
$3,200
Net fixed assets
$14,000
$17,000
a. Calculate the operating cash flow for 2018. (Hint: Taxes = Earnings before taxes x Tax rate) show your work
b. Calculate the cash flow from assets for 2018. (show your work )
c. Calculate the cash flow to creditors and the cash flow to shareholders for 2018. (show your work)
You are given the following information: 2018
Sales
$23,000
Cost of goods sold
$16,000
Depreciation expense
$4,000
Interest
$1,800
Dividends
$1,300
Tax rate
35%
New debt issuance
$2,000
Explanation / Answer
EBIT = Sales - Cost of Goods Sold - Depreciation Expense
EBIT = $23,000 - $16,000 - $4,000
EBIT = $3,000
EBT = EBIT - Interest Expense
EBT = $3,000 - $1,800
EBT = $1,200
Taxes = EBT * tax rate
Taxes = $1,200 * 35%
Taxes = $420
Operating Cash Flow = EBIT + Depreciation - Taxes
Operating Cash Flow = $3,000 + $4,000 - $780
Operating Cash Flow = $6,220
Change in NWC = Ending NWC - Beginning NWC
Change in NWC = (Ending Current Assets - Ending Current Liabilities) - (Beginning Current Assets - Beginning Current Liabilities)
Change in NWC = ($5,900 - $3,200) - ($4,800 - $2,700)
Change in NWC = $600
Net Capital Spending = Ending Fixed Assets + Depreciation - Beginning Fixed Assets
Net Capital Spending = $17,000 + $4,000 - $14,000
Net Capital Spending = $7,000
Cash Flow from Assets = Operating Cash Flow - Change in NWC - Net Capital Spending
Cash Flow from Assets = $6,220 - $600 - $7,000
Cash Flow from Assets = -$1,380
Cash Flow to Creditors = Interest Expense - Net New Debt
Cash Flow to Creditors = $1,800 - $2,000
Cash Flow to Creditors = -$200
Cash Flow to Stockholders = Cash Flow from Assets - Cash Flow to Creditors
Cash Flow to Stockholders = -$1,380 - (-$200)
Cash Flow to Stockholders = -$1,180
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.