Question

Thompson's Jet Skis has operating cash flow of $994. Depreciation is $102, taxes are $298, and interest paid is $65. A net total of $82 was paid on long-term debt. The firm spent $481 on fixed assets and increased its net working capital by $32. What is the amount of the cash flow to stockholders?h

Answer 1

THE CASH FLOW IDENTITIES ARE:
CASH FLOW FROM ASSETS= CASH FLOW TO CREDITORS + CASH FLOW TO STOCKHOLDERS
OPERATING CASH FLOW:
EBIT + DEPRECIATION - TAXES
NET CAPITAL SPENDING:
ENDING NET FIXED ASSETS - BEGINNING NET FIXED ASSETS + DEPRECIATION
CHANGE IN NET WORKING CAPITAL:
ENDING NET WORKING CAPITAL - BEGINNING NET WORKING CAPITAL
CASH FLOW TO CREDITORS:
INTEREST PAID - NET NEW BORROWING
CASH FLOW TO STOCKHOLDERS:
DIVIDENDS PAID - NEW EQUITY RAISED
Calculations are given below:
CASH FLOW FROM ASSETS = 994-481-32 =	$              481
Cash flow to creditors = 65+82 =	$              147
Now,
CASH FLOW FROM ASSETS= CASH FLOW TO CREDITORS + CASH FLOW TO STOCKHOLDERS
Substituting available values in the above equation
we have:
481 = 147+Cash flow to stock holders
Cash flow to stock holders = 481-147 =	$              334
Answer: [A] $334