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?
e have been provided with the information as follow
| 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 |
Now we will prepare Operating cash Flow As follow
| Operating cashflow for the year 2015 | |
| Partiular | Amount in $ |
| Net Income | 74100 |
| Add | |
| depreciation expense | 18000 |
| Less | |
| Tax | 21315 |
| Net Operating Cash Flow | 70785 |
b. What is the 2015 cash flow to creditors?
| CFCfor the year 2015 | |
| Partiular | Amount in $ |
| Interest | 13200 |
| Less: | |
| Net new LTD | -3200 |
| CFC | 16400 |
c. What is the 2015 cash flow to stockholders?
| CFs for the year 2015 | |
| Partiular | Amount in $ |
| Devidend | 10,000 |
| Less: | |
| Net new equity | 4700 |
| CFS | 5,300 |
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.
