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4 years ago

Square Hammer Corp. shows the following information on its 2018 income statement:

Business

1 answer:

True [87]4 years ago

7 0

Answer and Explanation:

The computations are shown below:

a) The net income is

= Sales - cost - other expenses - depreciation expenses - interest expense - taxes

= $305,000 - $176,000 - $8,900 - $18,700 - $12,900 - $23,345

= $65,155

b) For Operating Cash flow

= EBIDT - taxes

= Sales - costs - other exp - taxes

= $305,000 - $176,000 - $8,900 - $23,345

= $96,755

c) Cash flow to creditors is

= interest paid - net new borrowing

= $12,900 - (- $4,900)

= $17,800

d) Cash flow to stockholders is

= dividend paid - net new equity raised

= $19,500 - $6,400

= $13,100

e)If net fixed assets increased by $46000 during the year, the addition to Net working capital is

As we know that

Cash flow from assets = Operating cash flow - Change in NWC - Net capital spending ............... (equation 1)

Cash flow from assets

= Cash flow to creditors + Cash flow to stockholders

= $17,800 + $13,100

= $30,900

And, the operating cash flow = $96,755

Net Capital Spending is

= Dep + increase in FA

= $18,700 + $46,000

= 64700

Placing the values in Equation (1), we get

$30,900 = $96,755 - Change in NWC - $64,700

Change in NWC is

= $96,755 - $64,700 - $30,900

= $1,155

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