Question

Calculate “Operating” Cash Flow, ΔNet Working Capital, Net Capital Spending, Cash Flow from Assets, Cash Flow to Creditors, and Cash Flow to Shareholders. Please show work and equations.

Balance Sheet	2015	2016		Income Statement	2016
Cash	5800	5820		Sales	26500
All Other Current Assets	4000	4910		Various Operating Expenses	11900
Net Fixed Assets	6600	9200		Depreciation Expense	1400
Current Liabilities	7200	8870		Interest Expense	920
Long-term Liabilities	5700	6940		Gain on Sale of Asset	1020
Common Stock	2500	3380		Taxable Income	13300
Retained Earnings	1000	740		Tax Expense	4060
				Net Income	9240
				Dividend Expense	9500

Answer 1

Operating cash flow = Net income + Non-cash expenses +/- net increase in non-cash working capital

Depreciation is a non-cash expense. non-cash working capital is accounts receivable, inventory, prepaid expenses and accounts payable. in the question components of all other current assets and current liabilities are not given. so we assume that all these components are non-cash. non-cash working capital is non-cash current assets - current liabilities. increase in non-cash current assets reduces operating cash flow and increase in current liabilities increases operating cash flow.

Operating cash flow = 9240 + 1400 - [(4910 - 4000) - (8870 - 7200)] = 9240 + 1400 + (910 - 1670) = 9240 + 1400 - (-760) = 11400

Changes in net working capital = current assets excluding cash - current liabilities = [(4910 - 4000) - (8870 - 7200)] = (910 - 1670) = -760

increase in current liabilities in higher than increase in current assets by 760 which is a cash inflow.

Net capital spending = net fixed assets 2016 + depreciation 2016 - net fixed assets 2015 = 9200 +1400 - 6600 = 4000

Cash flow from assets = operating cash flow - net capital spending = 11400 - 4000 = 7400

Cash flow to creditors is interest paid which is 920.

Cash flow to shareholders is dividend paid which is 9500.