Question

Graffiti Advertising, Inc., reported the following financial statements for the last two years.    2016 Income...

Graffiti Advertising, Inc., reported the following financial statements for the last two years.
  

2016 Income Statement
Sales $ 568,700
Costs of goods sold 273,990
Selling and administrative 124,726
Depreciation 54,569
EBIT $ 115,415
Interest 19,450
EBT $ 95,965
Taxes 38,386
Net income $ 57,579
Dividends $ 10,300
Addition to retained earnings $ 47,279
GRAFFITI ADVERTISING, INC.
Balance Sheet as of December 31, 2015
Cash $ 13,390 Accounts payable $ 9,497
Accounts receivable 18,987 Notes payable 14,501
Inventory 13,801 Current liabilities $ 23,998
Current assets $ 46,178
Long-term debt $ 136,240
Net fixed assets $ 344,636 Owner's equity $ 230,576
Total assets $ 390,814 Total liabilities and owners’ equity $ 390,814
GRAFFITI ADVERTISING, INC.
Balance Sheet as of December 31, 2016
Cash $ 14,376 Accounts payable $ 10,519
Accounts receivable 21,092 Notes payable 16,473
Inventory 22,761 Current liabilities $ 26,992
Current assets $ 58,229
Long-term debt $ 152,700
Net fixed assets $ 406,304 Owner's equity $ 284,841
Total assets $ 464,533 Total liabilities and owners’ equity $ 464,533

a. Calculate the operating cash flow. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
  
Operating cash flow            $
  
b. Calculate the change in net working capital. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
  
Change in net working capital            $
  
c. Calculate the net capital spending. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
  
Net capital spending            $
  
d. Calculate the cash flow from assets. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
  
Cash flow from assets            $

e. Calculate the 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            $

f. Calculate the cash flow to stockholders. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
  
Cash flow to stockholders            $

Homework Answers

Answer #1

a)

Operating cash flow = EBIT + Depreciation - tax

= 115,415 + 54,569 - 38,386 = 131598

b)

Change in net working capital = net working capital at the end - net working capital in the beginning

= (Current assets at the end - current liabilities at the end) - (Current assets in the beginning - current liabilities in the beginning)

= (58,229 - 26,992) - (46,178 - 23,998) = 31237 - 22180 = 9057

c)

Net capital spending;

= net fixed asset at the end - net fixed asset at the beginning + depreciation

= 406,304 - 344,636 + 54,569

= 116237

d)

Cash flow from assets = operating cash flow - change in working capital - net capital spending

= 131598 - 9057 - 116237 = 6304

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