QuestionsFinancial Statements Q 1 Barrett Inc has sales

Questions-Financial Statements

Q 1) • Barrett, Inc. , has sales of $47, 500, costs of $20, 500, depreciation expense of $1, 800, and interest expense of $1, 300. • If the tax rate is 35 percent, what is the operating cash flow, or OCF?

OCF = EBIT + Depreciation – Taxes OCF = $25, 200 + 1, 800 – 8, 365 OCF = $18, 635

Q 2) • Gordon Driving School’s 2014 balance sheet showed net fixed assets of $3. 2 million, and the 2015 balance sheet showed net fixed assets of $3. 8 million. The company’s 2015 income statement showed a depreciation expense of $235, 000. • What was the company's net capital spending for 2015?

Net capital spending = NFAend – NFAbeg + Depreciation Net capital spending = $3, 800, 000 – 3, 200, 000 + 235, 000 Net capital spending = $835, 000

Q 3) • Ritter Corporation’s accountants prepared the following financial statements for year-end 2015. • OFCF? • FCF?

• OFCF=EBIT-Tax+Depreciation-CAPEX-ΔWC • EBIT: NI-COGS-SG&A-Depreciation: 860 -620 -101=139 • Tax: 0 • CAPEX=ΔLT Assets: 401 -381=20 +101=121 • (Since everything is NET… In other words, Depreciation is taking care of, I have to add back depreciation) • ΔWC=WC(2015)-WC(2014)=(87+192 -147)-(66+176 -126)=132 -116=16 • =139 -0+101 -121 -16=103 • FCF=NI+Depreciation-CAPEX+ΔLT Debt-ΔWC • ΔLT Debt=LT Debt(2015)-LT Debt (2014)=167 -151=16 • =139+101 -121+16 -16=119

Q 4) • OFCF? • FCF?

• OFCF=EBIT-Tax+Depreciation-CAPEX-ΔWC • EBIT=634 • Tax: 162 • CAPEX=ΔLT Assets: 2290 -2264=26 +311=337 • (Since everything is NET… In other words, Depreciation is taking care of, I have to add back depreciation) • ΔWC=WC(2015)-WC(2014)=(503+418 -686)-(227+522 -613)=235 -136=99 • =634 -162+311 -337 -99=347 • FCF=NI+Depreciation-CAPEX+ΔLT Debt-ΔWC • ΔLT Debt=LT Debt(2015)-LT Debt (2014)=1300 -1350=-50 • =302+311 -337+(-50)-99=127