Consider the information below from a firm\'s balance sheet for 2011 and 2012. A
ID: 2631764 • Letter: C
Question
Consider the information below from a firm's balance sheet for 2011 and 2012. All the work has to be shown!
Current Assets 2012 2011 Change
Cash and Equivalents $1,561 $1,800 -$ 239
Short-Term Investments $1,052 $3,010 -$ 1,958
Accounts Receivable $3,616 $3,129 $ 487
Inventories $1,816 $1,543 $ 273
Other Current Assets $ 707 $ 601 $ 106
Total Current Assets $8,752 $10,083 -$1,331
Current Liabilities
Accounts Payable $5,173 $5,111 $ 62
Short-Term Debt $ 288 $ 277 $ 11
Other Current Liabilities$1,401 $1,098 $ 303
Total Current Liabilities $6,862 $6,486 $ 376
35) Assuming the Operating Cash Flows (OCF) are $7,155 and the Net Capital Spending (NCS) is $2,372, what is the Cash Flow from Assets?
Explanation / Answer
First we will calculate Net Working Capital for 2012:
NWC (2012) = Total Current Assets - Total Current liabilities = $8,752 - $6,862 = $1,890
NWC (2011) = Total Current Assets - Total Current liabilities = $10,083 - $6,486 = $3,597
Now, Decrease in Net Working Capital (NWC) = $1,890 - $3,597= -$1,707
It is given that Operating Cash Flows (OCF) are $7,155 and Net Capital Spending (NCS) is $2,372. And we have calculated Decrease in Net Working Capital above.
Cash Flow from Assets = Operating Cash Flows - Net Capital Spending