Question

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

2016 Income Statement
Sales	$	571,200
Costs of goods sold		273,965
Selling and administrative		124,721
Depreciation		54,564
EBIT	$	117,950
Interest		19,560
EBT	$	98,390
Taxes		39,356
Net income	$	59,034
Dividends	$	10,800
Addition to retained earnings	$	48,234

GRAFFITI ADVERTISING, INC. Balance Sheet as of December 31, 2015
Cash	$	13,440		Accounts payable	$	9,492
Accounts receivable		18,982		Notes payable		14,496
Inventory		13,806		Current liabilities	$	23,988
Current assets	$	46,228
				Long-term debt	$	135,840
Net fixed assets	$	344,786		Owner's equity	$	231,186
Total assets	$	391,014		Total liabilities and owners’ equity	$	391,014

GRAFFITI ADVERTISING, INC. Balance Sheet as of December 31, 2016
Cash	$	14,426		Accounts payable	$	10,524
Accounts receivable		21,087		Notes payable		16,478
Inventory		22,766		Current liabilities	$	27,002
Current assets	$	58,279
				Long-term debt	$	153,200
Net fixed assets	$	406,299		Owner's equity	$	284,376
Total assets	$	464,578		Total liabilities and owners’ equity	$	464,578

a. Calculate the operating cash flow. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
  
Operating cash flow            $
  
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.)
  
Change in net working capital            $
  
c. Calculate the net capital spending. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
  
Net capital spending            $
  
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.)
  
Cash flow from assets            $

e. Calculate the cash flow to creditors. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
  
Cash flow to creditors            $

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.)
  
Cash flow to stockholders            $

Answer 1

Answer a.

Operating Cash Flow = EBIT + Depreciation - Taxes
Operating Cash Flow = $117,950 + $54,564 - $39,356
Operating Cash Flow = $133,158

Answer b.

Change in Net Working Capital = Ending Net Working Capital - Beginning Net Working Capital
Change in Net Working Capital = (Ending Current Assets - Ending Current Liabilities) - (Beginning Current Assets - Beginning Current Liabilities)
Change in Net Working Capital = ($58,279 - $27,002) - ($46,228 - $23,988)
Change in Net Working Capital = $9,037

Answer c.

Net Capital Spending = Ending Net Fixed Assets + Depreciation - Beginning Net Fixed Assets
Net Capital Spending = $406,299 + $54,564 - $344,786
Net Capital Spending = $116,077

Answer d.

Cash Flow from Assets = Operating Cash Flow - Net Capital Spending - Change in Net Working Capital
Cash Flow from Assets = $133,158 - $116,077 - $9,037
Cash Flow from Assets = $8,044

Answer e.

Net New Long-term Debt = Ending Long-term Debt - Beginning Long-term Debt
Net New Long-term Debt = $153,200 - $135,840
Net New Long-term Debt = $17,360

Cash Flow to Creditors = Interest Paid - Net New Long-term Debt
Cash Flow to Creditors = $19,560 - $17,360
Cash Flow to Creditors = $2,200

Answer f.

Cash Flow from Assets = Cash Flow to Creditors + Cash Flow to Stockholders
$8,044 = $2,200 + Cash Flow to Stockholders
Cash Flow to Stockholders = $5,844