Chapter 2 Lecture Problems
14. Calculating Total Cash Flows.
Greene Co. shows the following information on its 2008 income statement:
Sales = $138,000
Costs = $71,500
Other expenses = $4,100
Depreciation expense = $10,100
Interest expense = $7,900
Taxes = $17,760
Dividends = $5,400.
In addition, you're told that the firm issued $2,500 in new equity during 2008, and redeemed
$3,800 in outstanding long-term debt.
What is the 2008 operating cash flow?
What is the 2008 cash flow to creditors?
What is the 2008 cash flow to stockholders?
If net fixed assets increased by $17,400 during the year, what was the addition to NWC?
To calculate the OCF, we first need to construct an income statement. The income
statement starts with revenues and subtracts costs to arrive at EBIT. We then
subtract out interest to get taxable income, and then subtract taxes to arrive at net
income. Doing so, we get:
Addition to retained earnings