Question

In 2006 Hewlett-Packard repurchased shares of common stock worth $5,241 million and made dividend payments of $894 million. Other financing activities raised $196 million, and Hewlett-Packard's total cash flow from financing was -$6,077 million. How much did the long-term debt accounts of Hewlett-Packard change?

Answer 1

Answer:

Hewlett Packard spend 5,241 million on stock buybacks, and 894 million for dividend payments. When we add this up we get 6,135 million. This was a negative cash flow for them as they were using cash for these transactions. Also they raised 196 million by other financing activities, and these were taking loans or debt financing, this was a cash inflow as they were borrowing cash. So if we only count these two transactions Hewlett's cash outflow was (6135-196)=5,939

But according to the question Hewlett's net cash flow from financing was an outflow of 6,077 million, which suggests that they did pay back some long term debt that they had borrowed in previous years.

We can find that by subtracting 5939 for 6077

=138 million so now we know they paid back 138 million of debt that they owed, so the change in debt is 138 million, because they payed 138 million back their long term debt decreased by $138 million

Explanation: