Answer:
Option (a) is correct.
Explanation:
EBIT:
= Sales - Cost of goods sold - Depreciation expense
= $42,900 - $26,800 - $1,900
= $14,200
Operating cash flow:
= EBIT + Depreciation - Taxes
= $14,200 + $1,900 - [($14,200 - $1,300) × 0.34]
= $16,100 - $4,386
= $11,714
Capital spending:
= Ending net fixed assets - Beginning net fixed assets + depreciation
= $13,900 - $14,300 + $1,900
= $1,500
Additions to NWC:
= Ending NWC - Beginning NWC
= (9,200 - 7,400) - (8,700 - 6,600)
= $1,800 - $2,100
= -$300
Therefore, the cash flow from assets for Fiscal Year 2020 is as follows:
= Operating cash flow - Capital spending - Additions to NWC
= $11,714 - $1,500 - (-$300)
= $10,514
