Consider the following financial information and answer the questions that follow: Sales Costs Depreciation Operating expenses Interest expenses Taxes Dividends Addition to Retained Earnings Long term debt repaid New Equity issued New fixed assets acquired You are required to: i) ii) iii) iv) v) vi) : $250,000 : $134,000 : $10,200 : $6,000 : $20,700 : $18,420 : $10,600 : $50,080 : $9,300 : $8,470 : $15,000 Calculate the operating cash flow Calculate the cash flow to creditors Calculate the cash flow to shareholders Calculate the cash flow from assets Calculate net capital spending Calculate change in NWC
Financial Ratios
A Ratio refers to a figure calculated as a reference to the relationship of two or more numbers and can be expressed as a fraction, proportion, percentage, or the number of times. When the number is determined by taking two accounting numbers derived from the financial statements, it is termed as the accounting ratio.
Return on Equity
The Return on Equity (RoE) is a measure of the profitability of a business concerning the funds by its stockholders/shareholders. ROE is a metric used generally to determine how well the company utilizes its funds provided by the equity shareholders.
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This was my answer to number 1.
- Calculate the operating cash flow.
- OCF=EBIT +
Depreciation - Tax
- OCF=EBIT +
Finding EBIT: Revenue – COGS – Operating Expense
EBIT = $250,000 - $134,000 - $6,000
EBIT = $110,000
Therefore, OCF= $110,000 + $10,200 - $18,420
OCF= $101,780
Can you explain why you included the depreciation of $10,200 when calculating the EBIT in your answer?
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