y XV2 are presented as follows 2015 2016 2016 Accounts payab

y XV2 are presented as follows: 2015 2016 2016 Accounts payable 100 100 80100 Total 120 Total Net Plant and equipment300 350 n stock and 150 paid-in surplus Total liabilities & 600 2015 Sales Cost of sold 150 Net I 91 1/ Calculate the operating cash flows (OCF) for year 2016. 2/ Calculate the changes in net working capital (NWC)

Solution

Answer 1.

Operating Cash Flows = EBIT + Depreciation - Taxes
Operating Cash Flows = $200 + $50 - $52.5
Operating Cash Flows = $197.5

Answer 2.

NWC, 2015 = Current Assets - Current Liabilities
NWC, 2015 = $200 - $120
NWC, 2015 = $80

NWC, 2016 = Current Assets - Current Liabilities
NWC, 2016 = $250 - $150
NWC, 2016 = $100

Change in NWC = NWC, 2016 - NWC, 2015
Change in NWC = $100 - $80
Change in NWC = $20

Answer 3.

Net Capital Spending = Net Plant and Equipment, 2016 + Depreciation - Net Plant and Equipment, 2015

Net Capital Spending = $350 + $50 - $300
Net Capital Spending = $100

Cash Flows from Assets = Operating Cash Flows - Net Capital Spending - Change in NWC
Cash Flows from Assets = $197.50 - $100 - $20
Cash Flows from Assets = $77.50

Answer 4.

Cash Flow to Creditors = Interest Expense - (Long-term Debt, 2016 - Long-term Debt, 2015)
Cash Flow to Creditors = $25 - ($250 - $200)
Cash Flow to Creditors = -$25

Answer 5.

Cash Flow to Shareholders = Dividend paid - (Common Stock and Paid-in Surplus, 2016 - Common Stock and Paid-in Surplus, 2015)
Cash Flow to Shareholders = $112.50 - ($160 - $150)
Cash Flow to Shareholders = $102.50

Answer 6.

Yes, Cash Flow identity holds as Cash Flow from Assets = Cash Flow to Creditors + Cash Flow to Shareholders.