Question

# Calculating total cash flows Given the information for Kerber's tennis shop inc., in problems 8 and...

Calculating total cash flows
Given the information for Kerber's tennis shop inc., in problems 8 and 9, suppose you also know that the firms net capital spending for 2018 was \$1,250,000 and that the firm reduced its net working capital investment by \$45000. What was the firms 2018 operating cash flow or OCF? Given cash flow to creditors -\$85000 and cash flow go stockholders \$170000

Ans:

The firms 2018 operating cash flow or OCF = \$1,290,000

Working:

Given

The Capital Spending for 2018 Was \$1,250,000

The reduction in net Working capital (NWC) investment for 2018 Was \$45,000

The cash flow to Creditors during 2018 was -\$85,000

The cash flow to stockholders during 2018 was \$170,000

cash flow from asset = cash flow to creditors + cash flow to stockholders

= -85,000 +170,000

= \$85,000

cash flow from asset = Operating Cash Flow - net capital spending - change in working capital

\$85,000 = OCF – 1,250,000- (-45,000)

\$85,000 = OCF -1,250,000+45,000

\$85,000= OCF – 1,205,000

\$85,000+\$1,205,000= OCF

OCF =\$1,290,000