The 2017 balance sheet of Kerber\'s Tennis Shop, Inc., showed long-term debt of
ID: 2814427 • Letter: T
Question
The 2017 balance sheet of Kerber's Tennis Shop, Inc., showed long-term debt of $6.4 million, and the 2018 balance sheet showed long-term debt of $6.6 million. The 2018 Income statement showed an Interest expense of $225,000. During 2018, the company had a cash flow to creditors of $25,000 and the cash flow to stockholders for the year was $80,000. Suppose you also know that the firm's net capital spending for 2018 was $1,490,000, and that the firm reduced its net working capital Investment by $93,000. What was the firm's 2018 operating cash flow, or OCF? (Enter your answer In dollars not millions of dollers, e.g., 1,234,567.) perating cash flowExplanation / Answer
Solution:
Cash flow to creditors = $25,000
Cash flow to stock holders = $80,000
Cash flow from assets = cash flow to creditors + cash flow to stockholders
Cash flow from assets = $25,000+$80,000= $1,05,000
Net capital spending =$14,90,000
Changes in net working capital = -$93,000
Cash flow from assets= Operating cash flow - changes in net working capital - net capital spending
$1,05,000= operating cash flow - (-93000)-14,90,000
Operating cash flow = 1,05,000+14,90,000-93,000=$15,02,000
Firm's operating cash flow (OCF) = $15,02,000
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