Question

Finding operating and free cash flows   Consider the balance sheets and selected data from the income statement of Keith Corporation that follow

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a. Calculate the​ firm's net operating profit after taxes​ (NOPAT) for the year ended December​ 31,

2019

2019.

b. Calculate the​ firm's operating cash flow​ (OCF) for the year ended December​ 31,

2019

2019.

c. Calculate the​ firm's free cash flow​ (FCF) for the year ended December​ 31,

2019

2019.

d.​ Interpret, compare and contrast your cash flow estimate in parts​ (b) and​ (c).

Keith Corporation Balance Sheets
	December 31
Assets	2019 2019	2018 2018
Cash	$ 1 comma 540 $1,540	$ 980 $980
Marketable securities	1 comma 830 1,830	1 comma 210 1,210
Accounts receivable	2 comma 010 2,010	1 comma 850 1,850
Inventories	2 comma 860 2,860	2 comma 780 2,780
Total current assets	$ 8 comma 240 $8,240	$ 6 comma 820 $6,820
Gross fixed assets	$ 29 comma 530 $29,530	$ 28 comma 140 $28,140
​Less: Accumulated depreciation	14 comma 700 14,700	13 comma 060 13,060
Net fixed assets	$ 14 comma 830 $14,830	$ 15 comma 080 $15,080
Total assets	$ 23 comma 070 $23,070	$ 21 comma 900 $21,900
Liabilities and​ Stockholders' Equity
Accounts payable	$ 1 comma 590 $1,590	$ 1 comma 500 $1,500
Notes payable	2 comma 840 2,840	2 comma 210 2,210
Accruals	150 150	310 310
Total current liabilities	$ 4 comma 580 $4,580	$ 4 comma 020 $4,020
​Long-term debt	$ 5 comma 130 $5,130	$ 5 comma 070 $5,070
Total liabilities	$ 9 comma 710 $9,710	$ 9 comma 090 $9,090
Common stock	$ 9 comma 970 $9,970	$ 9 comma 970 $9,970
Retained earnings	3 comma 390 3,390	2 comma 840 2,840
Total​ stockholders' equity	$ 13 comma 360 $13,360	$ 12 comma 810 $12,810
Total liabilities and​ stockholders' equity	$ 23 comma 070 $23,070	$ 21 comma 900 $21,900

Income Statement Data ​( 2019 2019​)
Depreciation expense	$ 1 comma 640 $1,640
Earnings before interest and taxes​ (EBIT)	2 comma 650 2,650
Interest expense	365 365
Net profits after taxes	1 comma 805 1,805
Tax rate	21 % 21%

Answer 1