Question

he 2017 balance sheet of Kerber's Tennis Shop, Inc., showed long-term debt of $6 million, and the 2018 balance sheet showed long-term debt of $6.2 million. The 2018 income statement showed an interest expense of $205,000. During 2018, the company had a cash flow to creditors of $5,000 and the cash flow to stockholders for the year was $60,000. Suppose you also know that the firm’s net capital spending for 2018 was $1,450,000, and that the firm reduced its net working capital investment by $85,000. What was the firm’s 2018 operating cash flow, or OCF

Answer 1

Answer:

The firm’s 2018 operating cash flow, or OCF is  $1,470,000

Explanation:

For computing the operating cash flow, we have to use the formula of cash flow from assets which is shown below

= Operating cash flow - net capital spending - changes in working capital

where,

cash flow from assets = cash flow to creditors + cash flow to shareholders

                                     = $5,000 + $60,000

                                     = $65,000

And, the other item would remain same

Now put these values to the above formula  

So, the value would equal to

$65,000 = Operating cash flow - $1,450,000 - (-$85,000)

$65,000 = Operating cash flow - $1,450,000 + $85,000

So, the operating cash flow = $1,470,000