Question

Graffiti Advertising, Inc., reported the following financial statements for the last two years.
  

2016 Income Statement
Sales	$	567,200
Costs of goods sold		274,005
Selling and administrative		124,729
Depreciation		54,572
EBIT	$	113,894
Interest		19,384
EBT	$	94,510
Taxes		37,804
Net income	$	56,706
Dividends	$	10,000
Addition to retained earnings	$	46,706

GRAFFITI ADVERTISING, INC. Balance Sheet as of December 31, 2015
Cash	$	13,360		Accounts payable	$	9,500
Accounts receivable		18,990		Notes payable		14,504
Inventory		13,798		Current liabilities	$	24,004
Current assets	$	46,148
				Long-term debt	$	136,480
Net fixed assets	$	344,546		Owner's equity	$	230,210
Total assets	$	390,694		Total liabilities and owners’ equity	$	390,694

GRAFFITI ADVERTISING, INC. Balance Sheet as of December 31, 2016
Cash	$	14,346		Accounts payable	$	10,516
Accounts receivable		21,095		Notes payable		16,470
Inventory		22,758		Current liabilities	$	26,986
Current assets	$	58,199
				Long-term debt	$	152,400
Net fixed assets	$	406,307		Owner's equity	$	285,120
Total assets	$	464,506		Total liabilities and owners’ equity	$	464,506

a. Calculate the operating cash flow. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
  
Operating cash flow            $
  
b. Calculate the change in net working capital. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
  
Change in net working capital            $
  
c. Calculate the net capital spending. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
  
Net capital spending            $
  
d. Calculate the cash flow from assets. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
  
Cash flow from assets            $

e. Calculate the cash flow to creditors. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
  
Cash flow to creditors            $

f. Calculate the cash flow to stockholders. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
  
Cash flow to stockholders            $

Answer 1

	Graffiti Advertising Inc.
	Operating Cash Flow: Earnings before interest and tax+depreciation-Income Tax
a)	Earnings before interest and tax=(A)	$                          1,13,894.00
	Depreciation=(B)	$                             54,572.00
	Income Tax=(C )	$                             37,804.00
	Operating Cash Flow=(A)+(B)-(C )	$                          1,30,662.00
b)	Change in Working Capital=Ending Working Capital-Beginning Working Capital
	Working Capital at the end=(Ending Current Assets-Ending Current Liabilities)
	Working Capital at the beginning=(Beginning Current Assets-Beginning Current Liabilities)
	Ending Current Assets	$                             58,199.00
	Ending Current Liabilities	$                             26,986.00
	Working Capital at the end=($58199-$26986)=(A)	$                             31,213.00
	Beginning Current Assets	$                             46,148.00
	Beginning Current Liabilities	$                             24,004.00
	Working Capital at the beginning=($46148-24004)=(B)	$                             22,144.00
	Change in Net working capital=($31213-$22144)=(A)-(B)	$                                9,069.00
c )	Capital Spending=Ending Net Fixed Assets-Beginning Net Fixed Assets+Depreciation
	Ending Net Fixed Assets=(A)	$                          4,06,307.00
	Beginning Net Fixed Assets=(B)	$                          3,44,546.00
	Depreciation=(C )	$                             54,572.00
	Capital Spending=(A)-(B)+(C )	$                          1,16,333.00
d )	Cash Flow from Assets=OCF-Change in Working Capital-Net capital spending
	OCF=(A)	$                          1,30,662.00
	Change in Working Capital=(B)	$                                9,069.00
	Net Capital Spending=(C )	$                          1,16,333.00
	Cash Flow from Assets=(A)-(B)-(C )	$                                5,260.00
e)	Cash Flow to creditors=Interest Paid-Change in Long term Debt
	Interest Paid=(A)	$                             19,384.00
	Change in long term debt=(Ending long term debt-Beginning long term debt)=($152400-136480)=(B)	$                             15,920.00
	Cash Flow to creditors=(A)-(B)	$                                3,464.00
f)	Cash flow to stockholders=Dividend Paid-Change in Equity
	Dividend Paid=(A)	$                             10,000.00
	Change in Equity=Ending Equity-Beginning Equity-Addition to retained earnings=($285120-$230210-$46706)=(B)	$                                8,204.00
	Cash flow to stockholders=(A)-(B)	$                                1,796.00