Question

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            $

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