Question

Use the following information for Ingersoll, Inc., (assume the tax rate is 40 percent):

    

	2014			2015
Sales	$	9,535		$	10,109
Depreciation		1,295			1,296
Cost of goods sold		2,866			3,230
Other expenses		809			704
Interest		695			773
Cash		4,279			5,373
Accounts receivable		5,609			6,297
Short-term notes payable		964			916
Long-term debt		15,330			17,750
Net fixed assets		36,155			37,317
Accounts payable		4,656			4,355
Inventory		9,840			10,108
Dividends		1,126			1,221

   

For 2015, calculate the cash flow from assets, cash flow to creditors, and cash flow to stockholders. (Do not round intermediate calculations. A negative answer should be indicated by a minus sign. Round your answers to 2 decimal places, e.g., 32.16.)

  

Cash flow from assets	$
Cash flow to creditors	$
Cash flow to stockholders	$

Answer 1

CFA = OCF − Change in NWC − Net capital spending

Let us first calculate the OCF,

OCF = EBIT + Depreciation - taxes,

sales : $10,109

cost of goods sold : $3230

depreciation : $1296

EBIT : $5583

other expenses : $704

interest $773

EBT : $4106

Taxes : $1642.4

Net income : $2463.6

So, OCF = $5583 + 1296 - 1642.4

=$5236.6

Changes in net working capital:(CA end - CL end ) - ( CA beg - CL beg)

=$16507 - 14,108

= $2,399

Net capital spending = NFA end - NFAbeg + depreciation

= $37,317 - $36,155 + 1296

=$2,458

So, cash flow from assets = OCF − Change in NWC − Net capital spending

= $5236.6 - $2,399 - $2,458

=$379.6

Cash flow to creditors = interest paid - (net new debt)

= 773 - ( 17750 - 15330)

=-$1647

As cash flow from assets = cash flow to creditors + cash flow from stakeholders

Cash flow to stockholders = Cash flow from assets − Cash flow to creditors

= $379.6 - (-$1647)

=$2026.6

Cash flow from assets = $379.6

Cash flow to creditors = -$1647

cash flow to stockholders = $2026.6