Question

1) Archer Company has total sales of $397,000, costs are $284,000, and depreciation is $35,200. The tax rate is 25 percent. The firm does not have any interest expense. What is the operating cash flow?

		$97,415
		$93,970
		$93,550
		$92,890
		$92,650

2)At the beginning of the year, Calpine, Inc. had current assets of $863,000 and current liabilities of $827,000. At the end of the year, the current assets are $978,000 and the current liabilities are $953,000. What is the change in net working capital?

		-$35,000
		$37,000
		$25,000
		-$58,000
		-$11,000

3) Corning Company has total sales of $638,000, costs are $471,000, and depreciation is $43,000. The tax rate is 25 percent. The interest expense is $35,000. What is the operating cash flow?

		$144,750
		$137,800
		$129,500
		$133,750
		$152,450

4)Dole Food had beginning net fixed assets of $486,000 and ending net fixed assets of $501,000. Assets valued at $42,000 were sold during the year. Depreciation was $35,800. What is the amount of net capital spending?

		$42,600
		$45,800
		$47,200
		$50,800
		$53,400

5)At the beginning of the year, long-term debt of Healthnet is $595,000 and total debt is $647,000. At the end of the year, long-term debt is $619,000 and total debt is $682,000. The interest paid is $30,100. What is the amount of the cash flow to creditors?

		$7,300
		-$5,400
		$6,100
		-$6,500
		$5,200

Answer 1

Question-1

Non Cash expenditure includes depreciation

Operating Cash Flow = (Sales-Cost-Non Cash expenses)*(1-taxrate)+Non Cash Expenses

= (397000-284000-35200)*(1-.25)+35200

= $ 93,550

Question-2

Change in Net Working Capital = Difference between Opening Working Capital Gap and closing working Capital gap

Working Capital Gap = Current assets minus Current Liabilities

From the Problem Opening Working Capital Gap = 863000-827000

= 36000

Closing Working Capital Gap = 978000-95300

= 25000

From the above the Changes in Working Capital Gap = 25000-36000

= -11000

Question-3

Assuming interest is a Non cash expenditure which means a provision. Non Cas expenditure includes Depreciation and Interest

Operating Cash Flow = (Sales-Cost-Non Cash expenses)*(1-taxrate)+Non Cash Expenses

= (638000-471000-43000-35000)*(1-.25)+43000+35000

= $144750

Question-4

Since the opening Fixed Assets (net) is 486000 and closing fixed assets net is 501000 and depreciation is 35800 and from this the capital spending is

Capital Spending = Opening fixed assets minus Depreciation minus closing fixed assets

= 486000-35800-501000

= 50,800

Hence Spend = 50,800

Question-5

The cash flow to creditors is Interest Paid-(Long term debt at year end-Long term debt at year begining)

= 30100-(619000-595000)

= $ 6100