Question

Nanticoke Industries had the following operating results for 2018: sales $30,420; cost of goods sold = $20,060; depreciation expense = $5,500; interest expense = $2,940; dividends paid = $1,750. At the beginning of the year, net assets were $17,410, current assets were $5,920, and current liabilities were $3,475. At the end of the year, net fixed assets were $20,960, current assets were $7,390, and current liabilities were $4,050. The tax rate for 2018 was 30 %.

a. What is net income for 2018? (Negative answers should be indicated by a minus sign. Omit $ sign in your response.)

Net income           $

b. What is the operating cash flow for 2018? (Negative answers should be indicated by a minus sign. Omit $ sign in your response.)

Operating cash flow           $

c. What is the cash flow from assets for 2018? (Negative answer should be indicated by a minus sign. Omit $ sign in your response.)

Cash flow from assets           $

d. If no new debt was issued during the year, what is the cash flow to creditors? What is the cash flow to shareholders? (Negative answers should be indicated by a minus sign. Omit $ sign in your response.)

Cash flow to creditors	$
Cash flow to shareholders	$

Answer 1

a)

sales	30420
less:cost of goods sold	-20060
Depreciation expense	-5500
Earning before interest and tax	4860
less:Interest expense	-2940
Earning before tax	1920
less:Taxes [1920*30%]	-576
Net income	1344

b)

Operating cash flow = EBIT + Depreciation expense- taxes

                            = 4860 +5500 -576

                            = 9784

c)Net capital spending =net fixed asset at end +depreciation expense -Net fixed asset at beginning

                = 20960 +5500 -17410

               = 9050

Working capital =current asset -current liabilities

End :7390-4050 = 3340

Beginning :5920 -3475 = 2445

Change in working capital = 3340 -2445= 895

Cash flow from asset =operating cash flow - net capital spending - change in working capital

        = 9784-9050-895

         = -161

d)

cash flow to creditors =Interest paid - [Long term debt at end -long term debt at beginning]

        = 2940 - [0,no change ]

        = 2940

cash flow from asset = cash flow to creditors + cash flow to shareholders

     -161 = 2940 + cash flow to shareholders

   cash flow to shareholders = -161 -2940

                             = - 3101