Question

The 2017 balance sheer of Kerbers Tennis shop, inc., showed long terms debt of $5.7 million, and the 2018 balance sheer shpwed long-term debt of $5.9 milliom. The 2018 income statement showed an interest expense of $190,000. During 2018, the company had a cash floq to creditors of-$10,000 and the cash flow to stockholder for the year was $70,000. Suppose you alos know that the firms net captial spending for 2018 was $1,420,000, and the the firm reduced its net working captial investment by $79,000.

What was the firms 2018 operating cash flow or OCF?

Answer 1

Cash Flows to Creditors = -$10,000
Cash Flows to Stockholder = $70,000

Cash Flows from Assets = Cash Flows to Creditors + Cash Flows to Stockholder
Cash Flows from Assets = -$10,000 + $70,000
Cash Flows from Assets = $60,000

Change in Net Working Capital = -$79,000
Net Capital Spending = $1,420,000

Cash Flows from Assets = Operating Cash Flow - Change in Net Working Capital - Net Capital Spending
$60,000 = Operating Cash Flow - (-$79,000) - $1,420,000
Operating Cash Flow = $1,401,000