The 2008 balance sheet of Maria\'s Tennis Shop, Inc., showed $2.8 million in lon
ID: 2812977 • Letter: T
Question
The 2008 balance sheet of Maria's Tennis Shop, Inc., showed $2.8 million in long-term debt, $790,000 in the common stock account, and $6.35 million in the additional paid-in surplus account. The 2009 balance sheet showed $3.4 million, $965,000, and $8.65 million in the same three accounts, respectively. The 2009 income statement showed an interest expense of $340,000. The company paid out $650,000 in cash dividends during 2009. If the firm's net capital spending for 2009 was $780,000, and the firm reduced its net working capital investment by $175,000, the firm's 2009 operating cash flow, or OCF?
Explanation / Answer
Cash flow from assets = Interest expense + Dividend to stockholders
= –$340,000 + 650,000 = $310,000
Cash flow from assets = $310,000 = OCF – Change in NWC – Net capital spending
= $310,000 = OCF – (–$175,000) – 780,000
Operating cash flow = $310,000 – 175,000 + 780,000
Operating cash flow= $915,000
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