The
2010 balance sheet of Maria's Tennis Shop, Inc., showed long-term debt
of $5.4 million, and the 2011 balance sheet showed long-term debt of
$5.60 million. The 2011 income statement showed an interest expense of
$175,000. During 2011, Maria’s Tennis Shop, Inc., had a cash flow to
creditors of -$25,000 and the cash flow to stockholders for the year was
$80,000. Suppose you also know that the firm’s net capital spending for
2011 was $1,390,000, and that the firm reduced its net working capital
investment by $73,000.
| What was the firm’s 2011 operating cash flow, or OCF? (Enter your answer in dollars, not millions of dollars, i.e. 1,234,567.) |
Explanation:
| Cash flow from assets | = Cash flow to creditors + Cash flow to stockholders |
| | = -$25,000 + 80,000 = $55,000 |
| | |
| Cash flow from assets | = $55,000 = OCF – Change in NWC – Net capital spending |
| | = $55,000 = OCF – (–$73,000) – 1,390,000 |
| | |
| Operating cash flow | = $55,000 – 73,000 + 1,390,000 |
| Operating cash flow | = $1,372,000 |
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