Question

Abe Corporation shows the following information on its 2022 income statement:

Sales $248,000, Cost of goods sold 114,500, Other expenses 7,300, Depreciation expense 10,000, Interest expense 13,600, Income tax expense 32,105
Additional information:
Dividends paid $ 11,300. The firm issued $8,500 in new equity. The firm issued $7,300 in long term debt
a. What is the 2022 operating cash flow?
b. What is the 2022 cash flow to creditors?
c. What is the 2022 cash flow to stockholders?
d. What is the 2022 net income?

Answer 1

The 2022 operating cash flow is $42,105. The 2022 cash flow to creditors is $28,505. The 2022 cash flow to stockholders is $30,805. The 2022 net income is $32,105.

Step-by-step explanation:

The 2022 operating cash flow can be calculated by adding back non-cash expenses to the net income. Non-cash expenses include depreciation expense, which is $10,000 in this case. The operating cash flow is calculated as follows:

Net Income + Depreciation Expense = Operating Cash Flow

$32,105 + $10,000 = $42,105

The 2022 cash flow to creditors can be calculated by subtracting interest expense from the operating cash flow. The cash flow to creditors is calculated as follows:

Operating Cash Flow - Interest Expense = Cash Flow to Creditors

$42,105 - $13,600 = $28,505

The 2022 cash flow to stockholders can be calculated by subtracting dividends paid from the operating cash flow. The cash flow to stockholders is calculated as follows:

Operating Cash Flow - Dividends Paid = Cash Flow to Stockholders

$42,105 - $11,300 = $30,805

The 2022 net income can be found directly from the information given on the income statement. It is $32,105.