Segment 1B Q1 6. Cash Flow from Assets [LO4] Suppose a company’s cash flow from
ID: 2734556 • Letter: S
Question
Segment 1B Q1
6. Cash Flow from Assets [LO4] Suppose a company’s cash flow from assets is negative for a particular period. Is this necessarily a good sign or a bad sign?
If you need this to solve the problem here it is, I'm just not sure if it applys, if not then just ignore this part
Cash Flow From Assets Problem:
Calculate each step of the cash flow from assets based on the following information. Use the examples in the presentation as a guide.
Working Capital Accounts:
2015: Current Assets = 4,400; Current Liabilities = 1,500
2014: Current Assets = 3,500; Current Liabilities = 1,200
Fixed Assets and Depreciation:
2015: Net Fixed Assets = 3,400
2014: Net Fixed Assets = 3,100
Depreciation Expense = 400
Long-Term Debt and Equity:
2015: Long-Term Debt = 4,000; Common Stock = 400
2014: Long-Term Debt = 3,950; Common Stock = 400
Income Statement:
EBIT = 2,000
Taxes = 300
Interest Expense = 350
Dividends = 500
Explanation / Answer
Cash flow to creditors = Interest paid – Net New Borrowings
= 350 - (4000 -3950)
= 300
Cash flow to stockholders = Dividends – Net new equity raised
= 500 – (400-400)
= 500
Cash flow from assets = cash flow to creditors + Cash flow to shareholders
= 300 +500
= 800