Question

Given the financial statement, calculate the Cash flow identity.

Report the results for year 2013 as follows:

Operating Cash Flow = ??

Net Capital Spending = ??

Change in NOWC = ??

Cash Flow from Asset = ??

Cash Flow to Creditors = ??

Cash Flow to Shareholders = ??

1	Income statement (in $ Thousands)			2012	2013
2
3		Net sales		500.00	600.00
4			Less: cogs	300.00	360.00
5		Gross profit		200.00	240.00
6			Less: operating exp	75.00	80.00
7			Less: Depr	25.00	30.00
8		EBIT		100.00	130.00
9			Less: Interest	33.50	38.50
10		Income before tax		66.50	91.50
11			Less: Income taxes	20.00	30.00
12		Net income		46.50	61.50
13
14		Cash dividend		17.00	20.00
15		Addition to retained earnings		29.50	41.50
16
17
18	Balance sheet (in $ Thousands)			2012	2013
19
20		Cash		39.00	16.00
21		Account receivable		50.00	80.00
22		Inventories		151.00	204.00
23		Current asset		240.00	300.00
24		Gross fixed asset		200.00	290.00
25			less: accumuled depr	95.00	125.00
26		Net fixed asset		105.00	165.00
27			Total assets	345.00	465.00
28
29		Account payable		30.00	45.00
30		Accrued liabilities		10.00	23.00
31		Short-term notes		20.00	27.00
32		Total current liabilities		60.00	95.00
33		Long-term debt		15.00	20.00
34		Total liabilities		75.00	115.00
35		Common stock		85.00	123.50
36		Retained earnings		185.00	226.50
37		Owners' equity		270.00	350.00
38			Total liabilities and equity	345.00	465.00

Answer 1

Operating Cash Flow = EBIT + Depreciation - Taxes
Operating Cash Flow = $130.00 + $30.00 - $30.00
Operating Cash Flow = $130.00

Net Capital Spending = Ending Gross Fixed Assets - Beginning Gross Fixed Assets
Net Capital Spending = $290.00 - $200.00
Net Capital Spending = $90.00

Change in NOWC = NOWC, 2013 - NOWC, 2012
Change in NOWC = (Current Assets, 2013 - Current Liabilities, 2013) - (Current Assets, 2012 - Current Liabilities, 2012)
Change in NOWC = ($300.00 - $95.00) - ($240.00 - $60.00)
Change in NOWC = $205.00 - $180.00
Change in NOWC = $25.00

Cash Flow to Assets = Operating Cash Flow - Net Capital Spending - Change in NOWC
Cash Flow to Assets = $130.00 - $90.00 - $25.00
Cash Flow to Assets = $15.00

Cash Flow to Creditors = Interest Expense - Net New Long-term Debt
Cash Flow to Creditors = Interest Expense - (Long-term Debt, 2013 - Long-term Debt, 2012)
Cash Flow to Creditors = $38.50 - ($20.00 - $15.00)
Cash Flow to Creditors = $38.50 - $5.00
Cash Flow to Creditors = $33.50

Cash Flow to Stockholders = Cash Flow from Assets - Cash Flow to Creditors
Cash Flow to Stockholders = $15.00 - $33.50
Cash Flow to Stockholders = -$18.50