Question

Use the following information for Taco Swell, Inc., (assume the tax rate is 21 percent):

2017 2018
Sales $16,549 $18,498
Depreciation 2,376 2,484
Cost of goods sold 5,690 6,731
Other expenses 1,353 1,178
Interest 1,110 1,325
Cash 8,676 9,247
Accounts receivable 11,488 13,482
Short-term notes payable 1,674 1,641
Long-term debt 29,060 35,229
Net fixed assets 72,770 77,610
Accounts payable 6,269 6,640
Inventory 20,424 21,862
Dividends 1,979 2,314

For 2018, calculate the cash flow from assets, cash flow to creditors, and cash flow to stockholders.

Answer 1

Answer:

Operating Cash Flows = EBIT - Taxes + Depreciation

Operating Cash Flows = $8,105 - $1,423.80 + $2,484

Operating Cash Flows = $9,165.20

Increase in NWC = NWC, 2018 - NWC, 2017

Increase in NWC = (Current Assets, 2018 - Current Liabilities, 2018) - (Current Assets, 2017 - Current Liabilities, 2017)

Increase in NWC = ($44,591 - $8,281) - ($40,588 - $7,943)

Increase in NWC = $3,665

Net Capital Spending = Net Fixed Assets, 2018 + Depreciation, 2018 - Net Fixed Assets, 2017

Net Capital Spending = $77,610 + $2,484 - $72,770

Net Capital Spending = $7,324

Cash Flow from Assets = Operating Cash Flows - Increase in NWC - Net Capital Spending

Cash Flow from Assets = $9,165.20 - $3,665 - $7,324

Cash Flow from Assets = -$1,823.80

Net New Long-term Debt = Long-term Debt, 2018 - Long-term Debt, 2017

Net New Long-term Debt = $35,229 - $29,060

Net New Long-term Debt = $6,169

Cash Flow to Creditors = Interest Expense - Net New Long-term Debt

Cash Flow to Creditors = $1,325 - $6,169

Cash Flow to Creditors = -$4,844

Cash Flow to Stockholders = Cash Flow from Assets - Cash Flow to Creditors

Cash Flow to Stockholders = (-$1,823.80) - (-$4,844)

Cash Flow to Stockholders = $3,020.20

Explanation: