Question

The 2017 balance sheet of Kerber's Tennis Shop, Inc., showed long-term debt of $6.4 million, and the 2018 balance sheet showed long-term debt of $6.6 million. The 2018 income statement showed an interest expense of $225,000. During 2018, the company had a cash flow to creditors of $25,000 and the cash flow to stockholders for the year was $80,000. Suppose you also know that the firm’s net capital spending for 2018 was $1,490,000, and that the firm reduced its net working capital investment by $93,000. What was the firm’s 2018 operating cash flow, or OCF? (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567.)

Answer 1

Answer:

$1,452,000

Explanation:

Calculation for the firm’s 2018 operating cash flow

First step is to calculate the Cash flow from assets using this formula

Cash flow from assets= Cash flow to creditors + Cash flow to stockholders

Let plug in the morning

Cash flow from assets=-$25,000 + $80,000= $55,000

Now let calculate Cash flow from assets using this formula

Cash flow from assets = OCF capital - Net capital spending-Change in Net Capital spending

Let plug in the formula

$55,000=OCF-$1,490,000-($93,000)

OCF=$1,490,000+$55,000-$93,000

OCF=$1,452,000

Therefore the firm’s 2018 operating cash flow is $1,452,000