0 value 300 points ance sheet of Jordans Golf Shop Inc showe

0. value 3.00 points ance sheet of Jordan\'s Golf Shop, Inc., showed long-term debt of $5.9 million, and the 2015 balance sheet showed long-term debt of $6.15 million. The 2015 income statement showed an interest expense of $200,000. The 2014 balance sheet showed $580,000 in the common stock account and $3.5 million in the additional paid-in surplus account. The 2015 balance sheet showed $620,000 and $3.9 million in the same two accounts, respectively. The company paid out $570,000 in cash dividends during 201 5. Suppose you also know that the firm\'s net capital spending for 2015 was $1,440,000, and that the firm reduced its net working capital investment by $83,000. What was the firm\'s 2015 operating cash flow, or OCF? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, e.g. 1,234,567.) Operating cash flow References eBook & Resources Worksheet

Solution

Answer:

Cash Flow to Creditors = Interest Paid – Net New Borrowing)
or Cash Flow to Creditors = Interest Paid – (Ending Long Term Debt – Beginning Long Term Debt)
Cash Flow to Creditors = $200,000 – ($6,150,000 - $5,900,000)
Cash Flow to Creditors = $200,000 - $250,000
Cash Flow to Creditors = -$50,000

Cash Flow to Stockholders = Dividend Paid – Net New Equity
or Cash Flow to Stockholders = Dividend Paid – (Ending Common Equity – Beginning Common Equity)
Ending Common Equity = $620,000 + $3,900,000 = $4,520,000
Beginning Common Equity = $580,000 + $3,500,000 = $4,080,000
Cash Flow to Stockholders = $570,000 – ($4,520,000 - $4,080,000)
Cash Flow to Stockholders = $570,000 - $440,000
Cash Flow to Stockholders = $130,000

Cash Flow to Assets = Cash Flow to Creditors + Cash Flow to Stockholders
Cash Flow to Assets = -$50,000 + $130,000
Cash Flow to Assets = $80,000

Cash Flow to Assets = OCF – Change in NWC – Net Capital Spending
$80,000 = OCF – (-$83,000) - $1,440,000
OCF = $1,437,000