Question

Blue Diamond Industries had the following operating results for 2017: sales = $29,580; cost of goods sold = $19,610; depreciation expense = $5,140; interest expense = $2,490; dividends paid = $1,300. At the beginning of the year, net fixed assets were $17,030, current assets were $5,830, and current liabilities were $3,400. At the end of the year, net fixed assets were $20,510, current assets were $7,604, and current liabilities were $3,950. The tax rate was 30 percent.

a. What was net income for 2017? (Do not round intermediate calculations.)

Net income             $  

b. What was the operating cash flow for 2017? (Do not round intermediate calculations.)

Operating cash flow             $  

c. What was the cash flow from assets for 2017? (Do not round intermediate calculations. A negative answer should be indicated by a minus sign.)

Cash flow from assets              $  

d-1 If no new debt was issued during the year, what was the cash flow to creditors? (Do not round intermediate calculations.)

Cash flow to creditors             $  

d-2 If no new debt was issued during the year, what was the cash flow to stockholders? (Do not round intermediate calculations. A negative answer should be indicated by a minus sign.)

Cash flow to stockholders             $

Answer 1

a. Net Income = (Sales - Cost - Interest expense - Depreciation)*(1-tax Rate) =(29580-19610-2490-5140)*(1-30%) =1638

b. Taxes = (Sales - Cost - Interest expense - Depreciation)*tax Rate =(29580-19610-2490-5140)*30% =702
. Operating cash Flow = EBIT - Taxes + Depreciation = (Sales - Cost - Depreciation) - Taxes + Depreciation
=(29580-19610-5140)-702+5140 =9268

c.
Increase in NWC =(7604-3950)-(5830-3400) =1224
Increase in Fixed Assets =20510-17030 =3480
Cash flow from Assets = OCF - Increase in Fixed Assets - Increase in NWC =9268-3480-1224 =4564

d-1. Cash Flow to creditors = Interest - New Debt =2490-0 =2490

d-2. Cash Flow to Equity Holders = Cash Flow from Asset - Cash Flow to Creditors =4564-2490 =2074