Question

Precision Manufacturing had the following operating results for 2014: sales = $36,942; cost of goods sold = $24,600; depreciation expense = $1,700; interest expense = $1,400; dividends paid = $1,000. At the beginning of the year, net fixed assets were $14,300, current assets were $8,700, and current liabilities were $6,600. At the end of the year, net fixed assets were $13,900, current assets were $9,200, and current liabilities were $7,400. The tax rate for 2014 was 34 percent. What is the cash flow from assets for 2014?

*please show work. thank you*

Answer 1

Change in net working capital = Net working capital End - Net working capital Begining

Changes in net working capital = (CAend -CLend ) - ( CAbeg - CL end )

= ( 9200 - 7400 ) - ( 8700 - 6600)

= 1800 - 2100

= -300

Net capital spending = Net Fixed asset end - Net fixed asset begining + Depreciation

= 13900 - 14300 + 1700

  = 1300

Income statement
Sales	36942
Less cost of goods sold	24600
Gross profit	12342
Less depreciation	1700
EBIT	10642
Less interest expense	1400
EBT	9242
Less tax	3142.28
Net income	6099.72

Operating cash flow =EBIT + Depreciation - income tax

= 10642 + 1700 - 3142.28

= $9199.72

Cash flow from Asset = Operating cash flow - Change in net working capital - Net capital spending

= 9199.72 - (-300) - 1300

= $ 8199.72 or $ 8200