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a. Operating cash flow for 2019-

Operating cash flow= Sales – (Costs + Other expenses) – Tax

Operating cash flow= $178,000 – ($103,600 + $5,100) – $12,705

Operating cash flow=$56,595

b. Cash flow to creditors for 2019-

Cash flow to creditors= Interest Paid + redemption of long term loans

Cash flow to creditors= $8,900+$4,000

Cash flow to creditors= $12,900

c. Cash flow to stockholders for 2019-

Cash flow to stockholders= dividend payments – new stock issues + redemption of shares.

Cash flow to stockholders= $10,143 – $2,900+0

Cash flow to stockholders= $7,243

d. If net fixed assets increased by $23,140 during the year, what was the addition to NWC-

Cash flow to creditors plus cash flow to stockholders equals cash flow from assets which means cash flow from assets is:

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

Cash flow from assets = $12,900 + $7,243

Cash flow from assets = $20,143

Net capital spending = Depreciation + Increase in fixed assets

Net capital spending = $12,100 + $23,140

Net capital spending = $35,240

Cash flow from assets = OCF – Change in NWC – Net capital spending

$20,143 = $56,595 – Change in NWC – $35,240

Change in NWC = $1,212

Please mention your doubts in the comment box, if any.

Calculating Cash Flows Given the information for Whelan, Inc., in Problems 10 and 11, suppose you also know that the firm’s net capital spending for 2019 was $745,000 and that the firm reduced its net working capital investment by $94,300. What was the firm’s 2019 operating cash flow, or OCF?


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