Question

A company had net fixed assets of $7 million on December 31, 2018 and $10 million on December 31, 2019. For 2019, the company’s depreciation expense was $1 million and its cash flow from operations was $7 million. During 2019, the company’s net working capital increased by $500,000 and net capital spending was $4 million. What was the firm’s cash flow from assets? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit any commas and the $ sign in your response. For example, an answer of $1,000.50 should be entered as 1000.50.)

Answer 1

Given for a company,

net fixed assets = $7 million on December 31, 2018

net fixed assets = $10 million on December 31, 2019

depreciation expense in 2019 = $1 million

net capital spending = $4 million

So, net capital spending = net fixed assets in 2019 - net fixed assets in 2020 + deprecition = 10 - 7 + 1 = $4 million

Change in net working capital = $500000

Cash flow from operation = $7 million

So, cash flow from assets = cash flow from operation - net capital spending - change in NWC

Cash flow from assets = 7000000 - 4000000 - 500000 = $2500000 or $2.5 million