Question

At the beginning of the year, a company has $10,300 for current liabilities and$200,300 for long-term debt. At the end of the year, the company has $20,400 for current liabilities and $300,200 for long-term debt. It paid out interest expense of $32,100 and dividends of $12,300. Calculate net new borrowing.

Answer 1

In cashflow, we only look at coming in an going out of cash in a year. We don't see accruals or recievables.

Here, we have to only calculate net new borrowings. Net new borrowings imply how much long term debt was issued in the current year.

Net new borrowings = (Long term at the end of the year - Long term debt at the beginning of the year)

= ($ 300,200 - $ 200,300)

= $ 99,900

Hence, a cashflow of $ 99,900 occured in additional borrowings in the current year.