Sheffield Co. shows the following information on its 2010 income statement: sale

Question

Sheffield Co. shows the following information on its 2010 income statement: sales = $153,000; costs = $81,900; other expenses = $5,200; depreciation expense = $10,900; interest expense = $8,400; taxes = $16,330; dividends = $7,200. In addition, you're told that the firm issued $2,600 in new equity during 2010, and redeemed $3,900 in outstanding long-term debt. Required: (a) What is the operating cash flow during 2010? (Do not include the dollar sign ($).) Operating cash flow $ (b) What is the cash flow to creditors during 2010? (Do not include the dollar sign ($).) Cash flow to creditors $ (c) What is the cash flow to stockholders during 2010? (Do not include the dollar sign ($).) Cash flow to stockholders $ (d) Assuming net fixed assets increased by $20,250 during the year, what was the addition to NWC? (Do not include the dollar sign ($).) Addition to net working capital

Explanation / Answer

Operating cash flow = Sales - Costs - other expenses - taxes = $153,000 - $81,900 - 5,200 - $16,330 = 49570 cash flow to creditors = $8,400 + $3,900 = 12,300 (Interest expense and long term debt redemption are the cash flow to creditors) Cash flow to stockholders = $7,200 - $2,600(dividends and Equity issues) = 4,600 Assuming net fixed assets increased by $20,250 during the year, Networking capital addition = 0 (current assets - current liabilities) only current assets increase results in Working capital addition

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