Question

The 2017 balance sheet of Kerber's Tennis Shop, Inc., showed long-term debt of $5.2 million, and the 2018 balance sheet showed long-term debt of $5.3 million. The 2018 income statement showed an interest expense of $170,000. During 2018, the company had a cash flow to creditors of $70,000 and the cash flow to stockholders for the year was $75,000. Suppose you also know that the firm’s net capital spending for 2018 was $1,380,000, and that the firm reduced its net working capital investment by $71,000. What was the firm’s 2018 operating cash flow, or OCF?

Answer 1

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

               = 70000 +75000

               = 145000

cash flow from asset = OCF - net capital spending - change in working capital

145000 = OCF - 1380000- (-71000)

145000 = OCF -1380000+71000

145000= OCF - 1309000

145000+1309000= OCF

OCF = 1454000