Question

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?

Answer 1

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”