Question

Schwert Corp. shows the following information on its 2015 statement of comprehensive income: sales = $167,000; costs = $91,000; other expenses = $5,400; depreciation expense = $8,000; interest expense = $11,000; taxes = $18,060; dividends = $9,500.
In addition, you’re told that the firm issued $7,250 in new equity during 2015 and redeemed$7,100 in outstanding long-term debt.

1. What is the 2015 operating cash flow?
2. What is the 2015 cash flow to creditors?
3. What is the 2015 cash flow to shareholders?
4. If net fixed assets increased by $22,400 during the year, what was the addition to net working capital?

Answer 1

1. OCF for 2015

OCF = Sales - Cost - Other Expenses - Taxes

OCF = 167000 - 91000 - 5400 - 18060

OCF for 2015 = $52540

2. 2015 cash flow to creditors

2015 cash flow to creditors = Interest + Net New Long Term Debt redeemed

2015 cash flow to creditors = $11000 + 7100

2015 cash flow to creditors = $18100

3. 2015 cash flow to shareholders

2015 cash flow to shareholders = Dividends - Equity Issued

2015 cash flow to shareholders = 9500 - 7250

2015 cash flow to shareholders = $2250

4. Addition to Net Working Capital

Cash Flow from Assets = Operating Cash Flow - Net Capital Spending - Change in NWC

Cash Flow to Creditors + Cash Flow to Shareholder = Operating Cash Flow - Increase in Fixed Assets - Depreciation - Change in NWC

18100 + 2250 = 52540 - 22400 - 8000 - Change in NWC

Addition to net working capital = $1790