Question

During the past year, a company had cash flow to creditors, an operating cash flow, and net capital spending of $30,591, $69,573, and $30,460, respectively. The net working capital at the beginning of the year was $12,352 and it was $14,650 at the end of the year. What was the company's cash flow to stockholders during the year

Answer 1

The company’s cash flow to stockholders during the year is $6,224

Solution:

To calculate this, we proceed as follows;

Change in Net Working Capital =

Ending Working Capital – Beginning Working Capital

Change in Net Working Capital = $14,650 - $12,352 = $2,298

Cash Flow from Assets =

Operating Cash Flow – Net Capital Spending - Change in Working Capital

Cash Flow from Assets = $69,573 - $30,460 - $2,298 = $36,815

Cash Flow to stockholders =

Cash Flow from Assets – Cash flow to Creditors

= $36,815 - $30,591 = $6,224