Question

Calculating Cash Flows Consider the following abbreviated financial statements for Weston Enterprises:

2015 and 2014 Partial Balance Sheets

Assets

	2015	2014
Current assets	$1,176	$964
Net fixed assets	$5,104	$4,384

Liabilities and Owners' Equity

	2015	2014
Current liabilities	$445	$401
Long-term debt	$2,713	$2,380

2015 Income Statement

Sales	$14,740
Costs	$5,932
Depreciation	$1,190
Interest paid	$328

a. What is owners' equity for 2014 and 2015?

b. What is the change in net working capital for 2015?

c. In 2015, Weston Enterprises purchased $2,350 in new fixed assets. How much in fixed assets did Weston Enterprises sell? What is the cash flow from assets for the year? (The tax rate is 40 percent)

d. During 2015, Weston Enterprises raised $455 in new long-term debt. How much long-term debt must Weston Enterprises have paid off during the year? What is the cash flow to creditors?

I need the following information:

	Number
Sales
Cost of goods sold
Depreciation expense
Interest expense
2014 Net fixed assets
2014 Current assets
2014 Current liabilities
2014 Long-term debt
2015 Net fixed assets
2015 Current assets
2015 Current liabilities
2015 Long-term debt
2015 New fixed assets purchased
2015 New long-term debt
Tax rate

Answer 1

Answer a.

2014:

Owners’ Equity = Total Assets - Total Liabilities
Owners’ Equity = (Current Assets + Net Fixed Assets) - (Current Liabilities + Long-term Debt)
Owners’ Equity = ($964 + $4,384) - ($401 + $2,380)
Owners’ Equity = $2,567

2015:

Owners’ Equity = Total Assets - Total Liabilities
Owners’ Equity = (Current Assets + Net Fixed Assets) - (Current Liabilities + Long-term Debt)
Owners’ Equity = ($1,176 + $5,104) - ($445 + $2,713)
Owners’ Equity = $3,122

Answer b.

Change in Net Working Capital = Net Working Capital, 2015 - Net Working Capital, 2014
Change in Net Working Capital = (Current Assets, 2015 - Current Liabilities, 2015) - (Current Assets, 2014 - Current Liabilities, 2014)
Change in Net Working Capital = ($1,176- $445) - ($964 - $401)
Change in Net Working Capital = $168

Answer c-1.

Net Capital Spending = Net Fixed Assets, 2015 + Depreciation, 2015 - Net Fixed Assets, 2014
Net Capital Spending = $5,104 + $1,190 - $4,384
Net Capital Spending = $1,910

Net Capital Spending = Purchase of Fixed Assets - Sale of Fixed Assets
$1,910 = $2,350 - Sale of Fixed Assets
Sale of Fixed Assets = $440

Answer c-2.

EBIT = Sales - Costs - Depreciation
EBIT = $14,740 - $5,932 - $1,190
EBIT = $7,618

EBT = EBIT - Interest Paid
EBT = $7,618 - $328
EBT = $7,290

Taxes = EBT * Tax Rate
Taxes = $7,290 * 40%
Taxes = $2,916

Operating Cash Flow = EBIT + Depreciation - Taxes
Operating Cash Flow = $7,618 + $1,190 - $2,916
Operating Cash Flow = $5,892

Cash Flow from Assets = Operating Cash Flow - Net Capital Spending - Change in Net Working Capital
Cash Flow from Assets = $5,892 - $1,910 - $168
Cash Flow from Assets = $3,814

Answer d-1.

Net New Long-term Debt = Long-term Debt, 2015 - Long-term Debt, 2014
Net New Long-term Debt = $2,713 - $2,380
Net New Long-term Debt = $333

Cash Flow to Creditors = Interest Paid - Net New Long-term Debt
Cash Flow to Creditors = $328 - $333
Cash Flow to Creditors = -$5

Answer d-2.

Net New Long-term Debt = Long-term Debt raised - Long-term Debt repaid
$333 = $455 - Long-term Debt repaid
Long-term Debt repaid = $122