Question

Zigs Industries had the following operating results for 2015: sales = $26183; cost of goods sold = $16153; depreciation expense = $4913; interest expense = $2465; dividends paid = $1899. At the beginning of the year, net fixed assets were $17581, current assets were $5367, and current liabilities were $3941. At the end of the year, net fixed assets were $20981, current assets were $7870, and current liabilities were $3054. The tax rate for 2015 was 33 percent. If no new debt was issued during the year, what is the cash flow to creditors?

Answer 1

Cash flow to creditors if no new debt was issued during the year

The Cash flow to creditors is calculated by using the following formula

Cash flow to creditors = Interest Expenses – Net new long-term debts

Here, the company has not issued any new debts during the year and therefore, the Net new long-term debts will be Zero

Hence, the Cash flow to creditors = Interest Expenses – Net new long-term debts

= $2,465 - $0

= $2,465

“The Cash flow to creditors will be $2,465”