Question

What is the cash flow of the firm, or CF(A), for 2017?

Qwest Company
2017 Income Statement
Net sales	58,000.00
Cost of goods sold	40,600.00
Selling, general, and administrative expenses	2,900.00
Depreciation	2,320.00
Earnings before interest and taxes	12,180.00
Interest	1,160.00
Pretax income	11,020.00
Taxes	2755.00
Net income	8,265.00

Qwest Company
2016 and 2017 Balance Sheets
	2016	2017							2016	2017
Cash	2120	2436		Accounts payable				6,241		6,394
Accounts receivable	3,006	3,422		Accrued expenses				3,680		3,745
Inventory	5,310	5,950		Current liabilities				9,921		10,139
Current assets	10,436	11,808		Long-term debt				17,536		20,291
Net fixed assets	32,365	34,600		Owners' equity					15,344	15,978
Total assets	42,801	46,408		Total liabilities and equity				42,801		46,408

		$3,174
		-$5,012
		-$1,766
		$6,036
		$1,743

Answer 1

Answer: The correct answer is $6,036

Operating Cash Flow = EBIT + Depreciation – Taxes
Operating Cash Flows = $12,180 + $2,320 - $2,755
Operating Cash Flows = $11,745

Capital Spending = Ending Net Fixed Assets – Beginning Net Fixed Assets + Depreciation
Capital Spending = $34,600 - $32,365 + $2,320
Capital Spending = $4,555

Addition to Net Working Capital = Ending Net Working Capital – Beginning Net Working Capital

Ending Net Working Capital = Ending Current Assets – Ending Current Liabilities
Ending Net Working Capital = $11,808 - $10,139
Ending Net Working Capital = $1,669

Beginning Net Working Capital = Beginning Current Assets – Beginning Current Liabilities
Beginning Net Working Capital = $10,436 - $9,921
Beginning Net Working Capital = $515

Addition to Net Working Capital = $1,669 - $515
Addition to Net Working Capital = $1,154

Cash Flow from Assets = Operating Cash Flow – Capital Spending – Addition to Net Working Capital
Cash Flow from Assets = $11,745 - $4,555 - $1,154
Cash Flow from Assets = $6,036