Question

1. You are given the (partial) financial statements for Super Manu. Below. You also know that the firm paid out $1,000 in dividends and the marginal tax rate is 34%.

Super Manufacturing Co.

Income Statement 2012

Sales             38,900

COGS            24,600

                 Depreciation      1,700

          Interest Expense        1,400

Balance Sheet
Assets                2012 2011          Liab.                   2012 2011

Current Assets: 9,200 8,700     Current Liab.        7,400 6,600

Fixed Assets:   13,900  14,300

What is the operating cash flow for the firm?

What is the change in net working capital?

Answer 1

Answer a.

EBIT = Sales - Costs - Depreciation
EBIT = $38,900 - $24,600 - $1,700
EBIT = $12,600

EBT = EBIT - Interest Paid
EBT = $12,600 - $1,400
EBT = $11,200

Taxes = EBT * Tax Rate
Taxes = $11,200 * 34%
Taxes = $3,808

Operating Cash Flow = EBIT + Depreciation - Taxes
Operating Cash Flow = $12,600 + $1,700 - $3,808
Operating Cash Flow = $10,492

Answer b.

Change in Net Working Capital = Net Working Capital, 2012 - Net Working Capital, 2011
Change in Net Working Capital = (Current Assets, 2012 - Current Liabilities, 2012) - (Current Assets, 2011 - Current Liabilities, 2011)
Change in Net Working Capital = ($9,200 - $7,400) - ($8,700 - $6,600)
Change in Net Working Capital = -$300