The 2008 balance sheet of Maria\'s Tennis Shop, Inc., showed $2.55 million in lo
ID: 2816011 • Letter: T
Question
The 2008 balance sheet of Maria's Tennis Shop, Inc., showed $2.55 million in long-term debt, $790,000 in the common stock account, and $6.05 million in the additional paid-in surplus account. The 2009 balance sheet showed $3.8 million, $905,000, and $8.25 million in the same three accounts, respectively. The 2009 income statement showed an interest expense of $330,000. The company paid out $640,000 in cash dividends during 2009. If the firm's net capital spending for 2009 was $680,000, and the firm reduced its net working capital investment by $135,000, the firm's 2009 operating cash flow, or OCF?
rev: 09_17_2012
$-2,595,000
$-4,420,000
$-2,050,000
$-3,330,000
$2,865,000
The 2008 balance sheet of Maria's Tennis Shop, Inc., showed $2.55 million in long-term debt, $790,000 in the common stock account, and $6.05 million in the additional paid-in surplus account. The 2009 balance sheet showed $3.8 million, $905,000, and $8.25 million in the same three accounts, respectively. The 2009 income statement showed an interest expense of $330,000. The company paid out $640,000 in cash dividends during 2009. If the firm's net capital spending for 2009 was $680,000, and the firm reduced its net working capital investment by $135,000, the firm's 2009 operating cash flow, or OCF?
Explanation / Answer
C.-2,050,000.
First let us know cash flow to creditors:
now,
let us know cash flow to shareholders:
now,
let us know cash flow from assets
=> cash flow to creditors + cash flow to stock holders
=>-920,000 - 1,675,000
=>- $2,595,000.
now,
operating cash flow = cash flow from assets + change in NWC + net capital spending
=>- 2,595,000 + (-135,000) +680,000
=> - $2,050,000.
increase in long term debt ($2.55 million - $3.8 million)` -$1,250,000 interest paid 330,000 cash flow to creditors -920,000Related Questions
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