Question

Weiland Co. shows the following information on its 2016 income statement: sales = $156,500; costs = $81,200; other expenses = $4,500; depreciation expense = $10,200; interest expense = $7,700; taxes = $18,515; dividends = $7,550. In addition, you're told that the firm issued $3,300 in new equity during 2016 and redeemed $5,300 in outstanding long-term debt.
  
a. What is the 2016 operating cash flow? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
  
Operating cash flow            $
  
b. What is the 2016 cash flow to creditors? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
  
Cash flow to creditors            $
  
c. What is the 2016 cash flow to stockholders? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
  
Cash flow to stockholders            $
  
d. If net fixed assets increased by $20,600 during the year, what was the addition to NWC? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
  
Addition to net working capital            $

Answer 1

Answer

	In $
Sales	156,500
Cost	81,200
Other expenses	4,500
Depreciation expense	10,200
EBIT	60,600
Interest expense	7,700
EBT	52,900
Taxes	18,515
Earnings After Tax	34,385
Dividends	7,550

A.

Operating Cash Flow = EBIT + Depreciation - Taxes

= 60,600 + 10,200 - 18,515

Operating Cash Flow = $52,285

B.

Cash Flow to Creditors = Redemption of Long term Debt + Interest Payment

= 5,300 + 7,700

Cash Flow to Creditors = $13,000

C.

Cash Flow to Shareholders = Dividend Payment – Issue of Equity

= 7,550 – 3,300

Cash Flow to Shareholders= $4,250

D.

Addition of NWC = (Increase in Fixed Assets + Repayment of Debt) – (Increase in Retained earnings after Dividend + Issue of Equity)

= (20,600 + 5,300) – [(34,385 - 7,550) + 3,300]

= 25,900 – 30,135

= (4,235)

Decrease in NWC= 4,235