13) Assume the following; Operating Cash flow 2017 = $5M; Net Capital Spending 2017 = 3M; and from 2016 to 2017 the firm increased its inventories by 3M and increased its current liabilities by 3M. What is this firm’s Cash Flow From Assets for 2017?
Firm’s Cash Flow from Assets for 2017
Firm’s Cash Flow from Assets is calculated by using the following formula
Cash flow from assets = Operating Cash flows - Net Capital Spending - Change in Net Working capital
= Operating Cash flows - Net Capital Spending – [Increase in Inventory – Increase in Current Liabilities]
= $5.00 Million - $3.00 Million – [$3.00 Million - $3.00 Million]
= $5.00 Million - $3.00 Million – $0.00 Million
= $2.00 Million
“Hence, the firm’s Cash Flow from Assets for 2017 will be $2.00 Million”
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