Volbeat Corp. shows the following information on its 2015 income statement: sale

Question

Volbeat Corp. shows the following information on its 2015 income statement: sales = $244,000; costs = $144,000; other expenses = $7,900; depreciation expense = $18,000; interest expense = $13,200; taxes = $21,315; dividends = $10,000. In addition, you’re told that the firm issued $4,700 in new equity during 2015 and redeemed $3,200 in outstanding long-term debt.

a. What is the 2015 operating cash flow?

b. What is the 2015 cash flow to creditors?

c. What is the 2015 cash flow to stockholders?

d. If net fixed assets increased by $30,000 during the year, what was the addition to NWC?

Explanation / Answer

we have been provided with the information as follow

Now we will prepare Operating cash Flow As follow

b. What is the 2015 cash flow to creditors?

c. What is the 2015 cash flow to stockholders?

d. If net fixed assets increased by $30,000 during the year, what was the addition to NWC?

We know that CFA = CFC + CFS, so:

  CFA = $16,400 + 5300 = $21,700

CFA is also equal to OCF – Net capital spending – Change in NWC. We already know OCF. Net capital spending is equal to:

  Net capital spending = Increase in NFA + Depreciation = $30,000 + 1800 = $48,000

Now we can use:

  CFA = OCF – Net capital spending – Change in NWC

  $21700 = $70785 – 48000 – Change in NWC

  Solving for the change in NWC gives $1085, meaning the company increased its NWC by $1085.

Income Statement Partiular Amount in $ Sales 244000 Less: costs 144000 Gross Profit 100000 Less: other expenses 7900 depreciation expense 18000 interest expense 13200 taxes 21315 dividends 10000 Net Profit 29585

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