The 2014 balance sheet of Sugarpova's Tennis Shop, Inc., showed long-term debt of $3.5 million, and the 2015 balance sheet showed long-term debt of $3.5 million. The 2015 income statement showed an interest expense of $160,000. During 2015, the company had a cash flow to creditors of $160,000 and the cash flow to stockholders for the year was $65,000. Suppose you also know that the firm's net capital spending for 2015 was $1,360,000, and that the firm reduced its net working capital investment by $67,000. What was the firm's 2015 operating cash flow, or OCF?

Question

Phoebe Ortiz

Business

6 May, 00:18

The 2014 balance sheet of Sugarpova's Tennis Shop, Inc., showed long-term debt of $3.5 million, and the 2015 balance sheet showed long-term debt of $3.5 million. The 2015 income statement showed an interest expense of $160,000. During 2015, the company had a cash flow to creditors of $160,000 and the cash flow to stockholders for the year was $65,000. Suppose you also know that the firm's net capital spending for 2015 was $1,360,000, and that the firm reduced its net working capital investment by $67,000. What was the firm's 2015 operating cash flow, or OCF?

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Answers (1)

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Hugo Quinn · Answer 1

Cash flow from operations = $1,518,000

Explanation:

As for the provided information, we have,

Operating Cash flow = Cash flow from Assets + Change in Net Working Capital + Net Capital Spending

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

Cash flow to creditors = $160,000

Cash flow to stockholders = $65,000

Cash flow from assets = $160,000 + $65,000 = $225,000

Change in net working capital = - $67,000

Net Capital Spending = $1,360,000

Cash flow from operations = $225,000 + - $67,000 + $1,360,000

= $1,518,000