The 2013 income statement of Southern Products Inc showed 29

The 2013 income statement of Southern Products, Inc., showed $2.9 million EBIT, $420,000 depreciation, $600,000 interest expenses, and its tax rate is 34%. If the firm\'s net capital spending for 2013 was $480,000, and the firm increased its net working capital investment by $30,000, find the firm\'s 2013 cash flow from assets (CFFA). Do not include the $ sign or comma, and round it to a whole dollar, e.g., 2345 (for $2,345).

Solution

first let us know operating cash flow:

operating cash flow =EBIT + depreciation - taxes.

here,

taxes = (EBIT - interest) * tax rate

=> ($2.9 million - 600,000) * 34%

=>$782,000

now,

operating cash flows = $2,900,000 +420,000 - 782,000

=>$2,538,000

cash flow from assets = operating cash flow - net capital spending - change in net working capital investment

=>$2,538,000 - 480,000 - 30,000

=>$2,028,000.

cash flow from assets = 2028000.