FNCE 2P91 Quiz: Quiz 2

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ultramarinewoodchuck796

25 Jan 2016

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Net capital spending is the money spent on fixed assets less money received from the sale of fixed assets. It could be negative if the firm sold more assets than it purchased. Operating cash flow is defined as earnings before interest and depreciation minus taxes. Total cash flow of the firm includes capital spending and additions to net working capital. Free cash flow is cash flow from assets. Cash flow to creditors = interest paid - net new borrowing. Cash flow to shareholders = dividends - new equity raised. Cash flow from assets = cash flow to creditors (or bondholders) + cash flow to shareholders (or owners) Cash flow from assets = operating cash flow - net capital spending - changes in net working capital (nwc) where: operating cash flow = earnings before interest and taxes (ebit) + depreciation. Taxes: net capital spending = ending net fixed assets. + depreciation c. changes in nwc = ending nwc.

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Dennis Co. shows the following information on its 2016 incomestatement: sales = $157,000; costs = $81,100; other expenses =$4,400; depreciation expense = $10,100; interest expense = $7,600;taxes = $18,830; dividends = $7,600. In addition, you're told thatthe firm issued $3,400 in new equity during 2016 and redeemed$5,500 in outstanding long-term debt.

a. What is the 2016 operating cash flow?(Do not round intermediate calculations and round youranswer to the nearest whole number, e.g., 32.)

Operating cash flow $

b. What is the 2016 cash flow to creditors?(Do not round intermediate calculations and round youranswer to the nearest whole number, e.g., 32.)

Cash flow to creditors $

c. What is the 2016 cash flow to stockholders?(Do not round intermediate calculations and round youranswer to the nearest whole number, e.g., 32.)

Cash flow to stockholders $

d. If net fixed assets increased by $20,650 duringthe year, what was the addition to NWC? (Do not roundintermediate calculations and round your answer to the nearestwhole number, e.g., 32.)

Addition to net working capital $

oliveotter780

2016 2017 2016 2017 Current assets $ 934 $ 984 Currentliabilities $ 375 $ 398 Net fixed assets 3,897 4,576 Long-term debt2,021 2,167 WESTON ENTERPRISES 2017 Income Statement Sales $ 11,770Costs 5,710 Depreciation 1,060 Interest paid 180 a. What wasowners' equity for 2016 and 2017? (Do not round intermediatecalculations.) Owners' equity 2016 $ Owners' equity 2017 $ b. Whatwas the change in net working capital for 2017? (Do not roundintermediate calculations.) Change in NWC $ c-1 In 2017, thecompany purchased $1,845 in new fixed assets. How much in fixedassets did the company sell? (Do not round intermediatecalculations.) Fixed assets sold $ c-2 In 2017, the companypurchased $1,845 in new fixed assets. What was the cash flow fromassets for the year? The tax rate is 35 percent. (Do not roundintermediate calculations.) Cash flow from assets $ d-1 During2017, the company raised $400 in new long-term debt. How muchlong-term debt must the company have paid off during the year? (Donot round intermediate calculations.) Debt retired $ d-2 During2017, the company raised $400 in new long-term debt. What was thecash flow to creditors? (Do not round intermediate calculations.)Cash flow to creditors $

crimsonyellowjacket775

1. Bowyer Driving Schoolâs 2014 balance sheet showed net fixed assets of $4.4 million, and the 2015 balance sheet showed net fixed assets of $5.1 million. The companyâs 2015 income statement showed a depreciation expense of $240,000.What was net capital spending for 2015?

2. The 2014 balance sheet of Sugarpovaâs Tennis Shop, Inc., showed long-term debt of $5.5 million, and the 2015 balance sheet showed long-term debt of $5.9 million. The 2015 income statement showed an interest expense of $135,000. What was the firmâs cash flow to creditors during 2015?

3. Billyâs Exterminators, Inc., has sales of $746,000, costs of $300,000, depreciation expense of $52,000, interest expense of $36,000, and a tax rate of 35 percent. What is the net income for this firm?

4. The 2014 balance sheet of Sugarpova's Tennis Shop, Inc., showed long-term debt of $6.3 million, and the 2015 balance sheet showed long-term debt of $6.5 million. The 2015 income statement showed an interest expense of $220,000. During 2015, the company had a cash flow to creditors of $20,000 and the cash flow to stockholders for the year was $75,000. Suppose you also know that the firmâs net capital spending for 2015 was $1,480,000, and that the firm reduced its net working capital investment by $91,000.What was the firmâs 2015 operating cash flow, or OCF?

5. Braam Fire Prevention Corp. has a profit margin of 9.70 percent, total asset turnover of 1.42, and ROE of 18.61 percent. What is its firm's debt-equity ratio?

6. Based only on the following information for Bennington Corp., did cash go up or down? By how much?


Decrease in inventory	$510
Decrease in accounts payable	160
Increase in notes payable	740
Increase in accounts receivable	210

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FNCE 2P91 Quiz: Quiz 2

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