Question

Volbeat Corp. shows the following information on its 2015 income statement: sales = $275,000; costs = $188,000; other expenses = $7,900; depreciation expense = $15,200; interest expense = $13,600; taxes = $17,605; dividends = $10,500. In addition, you’re told that the firm issued $5,100 in new equity during 2015 and redeemed $3,600 in outstanding long-term debt.

(a) what is the 2015 operating cash flow?
(b) what is the 2015 cash flow to creditors?
(c) what is the 2015 cash flow to stoclkholders?

Answer 1

Answer: (1) $61,495

(2) $17,200

(3) $5,400

Step-by-step explanation:

Given that,

sales = $275,000

costs = $188,000

other expenses = $7,900

depreciation expense = $15,200

interest expense = $13,600

taxes = $17,605

dividends = $10,500

new equity issued = $5,100

Net new long-term debt = $3,600

EBIT = sales - depreciation expense - costs - other expenses

= $275,000 - $15,200 - $188,000 - $7,900

= $63,900

EBT = EBIT - Interest

= $63,900 - $13,600

= $50,300

EAT = EBT - Taxes

= $50,300 - $17,605

= $32,695

Retained earnings = EAT - Dividends

= $32,695 - $10,500

= $22,195

(1) operating cash flow = EBIT - Taxes + depreciation expense

= $63,900 - $17,605 + $15,200

= $61,495

(2) cash flow to creditors = Interest - Net new long-term debt

= $13,600 - (-$3,600)

= $17,200

(3) cash flow to stock holders = Dividend - net new equity

= $10,500 - $5,100

= $5,400