and average tax rale l 2 Financial Cash flow and statement o

and average tax rale l 2. Financial Cash flow and statement of cash flows (10 credits) You are researching Time Manufacturing and have found the following accounting statement of cash flows for the most recent year. You also know that the company paid $84 million in current taxes and had an interest expense of $42 million. Statement of Cash 192 76 13 Net income Deferred Taxes Change in Assets and liabilities -16 17 13 Accounts payable Accrued Expenses Total cash flow from operation 290 Investing activities Acquisition of fixed assets -198 21 Sale of foxed assets Total cash flow from investing activities Financing Activities Retirement of long-term debt proceeds from long-term debt sales change in notes payable -150 115 -81 Repurchase of stock Proceeds from new stock issue 43 -76 37 Total cash flow from financing activities change in cash(balance sheet) 10

Solution

1) Financial Cash Flow

A. Cash Flow from operating activities =

Net Income + Interest Expense + Depreciation - Tax Expense + Deferred Taxes + Changes in Asset and liabilities = 192 + 76 + 42 + 13 - 84 + 9 = 248

B. Cash Flow from investing activities = -177

C. Cash Flow from financing activities = Cash Flow from financing activities (as given) - Interest Expense = - 76 - 42 = -118

So, Financial Cash Flow = A + B + C

= 248 + (-177) + (-118)

= - 47 million

2) Cash Flow for shareholders = Proceeds from new issue - Dividends - Repurchase of old stock = 43 - 81 - 11 = -49

Cash Flow to Debtholders = Proceeds from long term debt sale - retirement of debt - interest expene = 115 - 150 - 42 = -77

Cash Flow to Investors = Cash Flow to Debtholders + Cash Flow to Stockholders = -49 + -77 = -126