Question

What is the cash flow of the firm, or (CF(A)), for 2018?

Avista Corporation
2018 Income Statement
Net sales	21,000
Cost of goods sold	9,700
Selling, general, and administrative expenses	2,200
Depreciation	1,700
Earnings before interest and taxes	7,400
Interest	700
Pretax income	6,700
Taxes	515
Net income	6,185

Avista Corporation 2017 and 2018 Balance Sheets
	2017	2018					2017	2018
Cash	350	420		Accounts payable			6,225	6,184
Accounts receivable	3,140	3,450		Accrued expenses			1,880	1,675
Inventory	5,320	5,340		Total			8,105	7,859
Total	8,810	9,210		Long-term debt			18,061	20,091
Net fixed assets	32,600	34,700		Owners' equity			15,244	15,960
Total assets	41,410	43,910		Total liabilities and equity			41,410	43,910

		$3,523
		-$3,634
		$3,527
		$4,139
		$4,413

Answer 1

Operating Cash Flow = EBIT + Depreciation - Taxes
Operating Cash Flow = $7,400 + $1,700 - $515
Operating Cash Flow = $8,585

Net Capital Spending = Net Fixed Assets, 2018 + Depreciation - Net Fixed Assets, 2017
Net Capital Spending = $34,700 + $1,700 - $32,600
Net Capital Spending = $3,800

Increase in NWC = (Current Assets, 2018 - Current Liabilities, 2018) - (Current Assets, 2017 - Current Liabilities, 2017)
Increase in NWC = ($9,210 - $7,859) - ($8,810 - $8,105)
Increase in NWC = $646

Cash Flow of the Firm = Operating Cash Flow - Net Capital Spending - Increase in NWC
Cash Flow of the Firm = $8,585 - $3,800 - $646
Cash Flow of the Firm = $4,139