Question

Cash Flow From Assets Problem: Calculate each step of the cash flow from assets based on the following information. Use the examples in the presentation as a guide. Working Capital Accounts: 2015: Current Assets = 4,400; Current Liabilities = 1,500 2014: Current Assets = 3,500; Current Liabilities = 1,200 Fixed Assets and Depreciation: 2015: Net Fixed Assets = 3,400 2014: Net Fixed Assets = 3,100 Depreciation Expense = 400 Long-Term Debt and Equity: 2015: Long-Term Debt = 4,000; Common Stock = 400 2014: Long-Term Debt = 3,950; Common Stock = 400 Income Statement/Dividends: EBIT = 2,000 Taxes = 300 Interest Expense = 350 Dividends = 500

Answer 1

Answer:

Operating Cash Flow = EBIT + Depreciation – Taxes
Operating Cash Flow = $2,000 + $400 - $300
Operating Cash Flow = $2,100

Net Capital Spending = Ending Net Fixed Assets – Beginning Net Fixed Assets + Depreciation
Net Capital Spending = $3,400 - $3,100 + $400
Net Capital Spending = $700

Ending Working Capital = Current Assets – Current Liabilities
Ending Working Capital = $4,400 - $1,500
Ending Working Capital = $2,900

Beginning Net Working Capital = Current Assets – Current Liabilities
Beginning Net Working Capital = $3,500 - $1,200
Beginning Net Working Capital = $2,300

Net Change in net working capital = Ending net working capital – Beginning Net working capital
Net Change in net working capital = $2,900 - $2,300
Net Change in net working capital = $600

Cash Flow from Assets = Operating Cash Flow – Net Capital Spending – Net change in net working capital
Cash Flow from Assets = $2,100 - $700 - $600
Cash Flow from Assets = $800