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Graffiti Advertising, Inc., reported the following financial statements for the last two years. 2019 Income Statement...

Graffiti Advertising, Inc., reported the following financial statements for the last two years.
2019 Income Statement
  Sales $ 573,200
  Costs of goods sold 273,945
  Selling & administrative 124,717  
  Depreciation 54,560
  EBIT $ 119,978
  Interest 19,648  
  EBT $ 100,330
  Taxes 40,132
  Net income $   60,198  
  Dividends $ 11,200
  Addition to retained earnings $ 48,998
GRAFFITI ADVERTISING, INC.
Balance Sheet as of December 31, 2018
  Cash $ 13,480    Accounts payable $ 9,488
  Accounts receivable 18,978    Notes payable 14,492
  Inventory 13,810
   Current liabilities $ 23,980
  Current assets $ 46,268    Long-term debt $ 135,520
  Net fixed assets $ 344,906    Owners' equity $ 231,674
     Total assets $ 391,174       Total liabilities and owners’ equity $ 391,174
GRAFFITI ADVERTISING, INC.
Balance Sheet as of December 31, 2019
  Cash $ 14,466   Accounts payable $ 10,528
  Accounts receivable 21,083   Notes payable 16,482
  Inventory 22,770
  Current liabilities $ 27,010
  Current assets $ 58,319   Long-term debt $ 153,600
  Net fixed assets $ 406,295   Owners' equity $ 284,004
     Total assets $ 464,614      Total liabilities and owners’ equity $ 464,614
a. Calculate the operating cash flow. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
b. Calculate the change in net working capital. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
c. Calculate the net capital spending. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
d. Calculate the cash flow from assets. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
e. Calculate the cash flow to creditors. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
f. Calculate the cash flow to stockholders. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.
a. Operating cash flow $134,406
b Change in net working capital $9,021
c. Net capital spending
d. Cash flow from assets
e. Cash flow to creditors
f. Cash flow to stockholders

Solutions

Expert Solution

Answer of Part 1:

Operating Cash Flow = EBIT + Depreciation – Taxes
Operating Cash Flow = $119,978 + $54,560 - $40,132
Operating Cash Flow = $134,406

Answer of Part 2:

Beginning Net Working Capital = Current Assets – Current Liabilities
Beginning Net Working Capital = $46,268 - $23,980
Beginning Net Working Capital = $22,288

Ending Net Working Capital = Current Assets – Current Liabilities
Ending Net Working Capital = $58,319 - $27,010
Ending Net Working Capital = $31,309

Change in Net Working Capital = Ending Net Working Capital – Beginning Net Working Capital
Change in Net Working Capital = $31,309 - $22,288
Change in Net Working Capital = $9,021

Answer of Part 3:

Net Capital Spending = Ending Net Fixed Assets – Beginning Net Fixed Assets + Depreciation
Net Capital Spending = $406,295 - $344,906 + $54,560
Net Capital Spending = $115,949

Answer of Part 4:

Cash Flow from Assets = Operating Cash Flow – Change in Net Working Capital – Net Capital Spending
Cash Flow From Assets = $134,406 - $9,021 - $115,949
Cash Flow from Assets = $9,436


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