Question

Goandwin, Inc. 2017 Income Statement Net sales $11,418 Cost of goods sold 6,320 Selling, general, and administrative expenses 2,419 Depreciation 967 Earnings before interest and taxes $1,712 Interest 230 Taxable Income $1,482 Taxes 519 Net Income $ 963 Goandwin, Inc. 2016 and 2017 Balance Sheets 2016 2017 2016 2017 Cash $ 298 $ 306 Accounts payable $6,219 $6,184 A/R 3,006 3,422 Accrued expenses 1,880 1,625 Inventory 5,210 5,650 Total C.L. $8,099 $7,809 Total C.A. $8,514 $9,378 Long-term debt $17,951 $21,991 Net Fixed Common Stock ($1.00 par) $1,435 $1,555 Assets $32,780 $36,400 Capital Surplus $7,529 $7,740 Retained Earnings $6,280 $6,683 Total Assets $41,294 $45,778 Total Liab. & Equity $41,294 $45,778 What is the cash flow of the firm (or cash flow from assets), for 2017? Group of answer choices $1,273 -$1,273 -$3,581 $3,414

Answer 1

-$3,581

Explanation:

For computation of cash flow from assets first we need to find out the net capital spending, changes in working capital and operating cash flow which is shown below:-

Cash flow from assets = Operating cash flow - net capital spending - changes in working capital

where,

Net capital spending = ending fixed assets - beginning fixed assets + depreciation

= $36,400 - $32,780 + $967

= $4,587

Changes in working capital = (ending balance of current assets - ending balance of current liabilities) - (beginning balance of current assets - beginning balance of current liabilities)

= ($9,378 - $7,809) - ($8,514 - $8,099)

= $1,569 - $415

= $1,154

Operating Cash Flow = Earnings before interest and taxes + Depreciation - Taxes

= $1,712 + $967 - $519

= $2,160

Now put these values to the cash flow from assets formula

= $2,160 - $4,587 - $1,154

= -$3,581