Looking for a step by step answer to this question I\'ve been struggling with an
ID: 2698927 • Letter: L
Question
Looking for a step by step answer to this question I've been struggling with and having little progress. Not looking for just the numbers, but also where they come from (ie. Sales of $161,500 - costs of $80,200 + Depreciation $9200) No pasting of links to similar problems; I want to use this exact problem with these exact numbers. I appreciate any help. Thanks;
Sheffield Co. shows the following information on its 2010 income statement: sales = $161,500; costs = $80,200; other expenses = $3,500; depreciation expense = $9,200; interest expense = $6,700; taxes = $21,665; dividends = $8,050. In addition, you're told that the firm issued $4,300 in new equity during 2010, and redeemed $7,300 in outstanding long-term debt
Assuming net fixed assets increased by $21,100 during the year, what was the addition to NWC?
Looking for a step by step answer to this question I've been struggling with and having little progress. Not looking for just the numbers, but also where they come from (ie. Sales of $161,500 - costs of $80,200 + Depreciation $9200) No pasting of links to similar problems; I want to use this exact problem with these exact numbers. I appreciate any help. Thanks;
Sheffield Co. shows the following information on its 2010 income statement: sales = $161,500; costs = $80,200; other expenses = $3,500; depreciation expense = $9,200; interest expense = $6,700; taxes = $21,665; dividends = $8,050. In addition, you're told that the firm issued $4,300 in new equity during 2010, and redeemed $7,300 in outstanding long-term debt
Assuming net fixed assets increased by $21,100 during the year, what was the addition to NWC?
Explanation / Answer
Hi,
Please find the answer as follows:
Cash Flow to Creditors = Interest - New Long Term Debt = 6700 - 7300 = (600)
Cash Flow to Stockholders = Dividends - New Equity = 8050 - 4300 = 3750
Net Capital Spending = Increase in NFA + Depreciation = 9200 + 21100 = 30300
CFA = Cash Flow to Creditors + Cash Flow to Stockholders = (600) + 3750 = 3150
Operating Cash Flow = EBIT + Depreciation - Taxes = 68600 + 9200 - 21665 = 56135
CFA = OCF - Net Capital Spending - Change in NWC
3150 = 56135 - 30300 - Change in NWC
Change in NWC = 22685
Thanks.