Cash Flow Analysis Cash Flow Analysis-Example 1 Current Accounts: 2008: CA - 3,5

Question

Cash Flow Analysis

Cash Flow Analysis-Example 1 Current Accounts: 2008: CA - 3,596 CL 2,140 2009: CA: 3,625 CL=1,787 Fixed Assets+ Depreciation: 2008: NFA: 2,261 2009: NFA 2,194 Dep Exp 500 Long Term Debt and Equity: 2008: LTD-581 CS-372 2009: LTD 538 CS 462 Income Statement: EBIT= 1,014 Taxes 368 Interest Expense 93 Dividends 285 Questions: 1. Solve for - Operating Cash Flow (OCF 2. Solve for - Net Capital Spending (NCS): 3. Solve for - Change in Net Working Capital (ANWC): 4. Solve for- Free Cash Flow (FCF): 5. Solve for - Cash Flow to Creditors 6. Solve for - Cash Flow to Equity 7. Cash Flow Identity

Explanation / Answer

Answer to Part 1.

Operating Cash Flow = EBIT + Depreciation – Taxes
Operating Cash Flow = $1,014 + $500 - $368
Operating Cash Flow = $1,146

Answer to Part 2.

Net Capital Spending = Ending Net FA – Beginning Net FA + Depreciation
Net Capital Spending = $2,194 - $2,261 + $500
Net Capital Spending = $433

Answer to Part 3.

Change in NWC = Ending NWC – Beginning NWC
Ending NWC = $3,625 - $1,787
Ending NWC = $1,838

Beginning NWC = $3,596 - $2,140
Beginning NWC = $1,456

Change in NWC = $1,838 - $1,456
Change in NWC = $382

Answer to Part 4.

Free Cash Flow = Operating Cash Flow – Capital Expenditure + Net Debt Issued
Net Debt Issued = $538 - $581
Net Debt Issued = -$43

Free Cash Flow = $1,146 - $433 + (-$43)
Free Cash Flow = $670

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