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Sagot :
The firm's 2021 operating cash flow, or OCF is -$886,500
How do we determine the operating cash flow?
The operating cash flow can be determined from the cash flows from assets formula where cash flow from assets is the operating cash flow minus net capital spending and net change in working capital
cash flow from assets=operating cash flow-net capital spending+ net increase in working capital
cash flow from assets = cash flow to creditors + cash flow to stockholders
cash flow to creditors = interest expense - net new long-term debt
cash flow to creditors=$97,500-($1,650,000-$1,435,000)
cash flow to creditors=$97,500-$215,000
cash flow to creditors=-$117,500
cash flow to stockholders = dividends - net new equity
cash flow to stockholders=$152,000-($157,000+$3,020,000-$147,000-$2,720,000)
cash flow to stockholders=-$158,000
cash flow from assets =-$117,500-$158,000
cash flow from assets =-$275,500
operating cash flow=unknown(assume it is x)
net capital spending=$1,030,000
net increase in working capital=$132,000
-$275,500=x-$1,030,000-$132,000
x=-$275,500+$1,030,000+$132,000
x=OCF=$886,500
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Full question:
The December 31, 2018, balance sheet of Whelan, Inc., showed long-term debt of $1,435,000, $147,000 in the common stock account, and $2,720,000 in the additional paid-in surplus account. The December 31, 2019, balance sheet showed long-term debt of $1,650,000, $157,000 in the common stock account and $3,020,000 in the additional paid-in surplus account. The 2019 income statement showed an interest expense of $97,500 and the company paid out $152,000 in cash dividends during 2019. The firm’s net capital spending for 2019 was $1,030,000, and the firm reduced its net working capital investment by $132,000. What was the firm's 2019 operating cash flow, or OCF?
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