Homework Clinic
Social Science Clinic => Business => Finance => Topic started by: jeatrice on Jul 10, 2018
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Consider the information below from a firm's balance sheet for 2013 and 2014.
Current Assets 2014 2013 Change
Cash and Equivalents 1,561 1,800 - 239
Short-Term Investments 1,052 3,010 -1,958
Accounts Receivable 3,616 3,129 487
Inventories 1,816 1,543 273
Other Current Assets 707 601 106
Total Current Assets 8,752 10,083 -1,331
Current Liabilities
Accounts Payable 5,173 5,111 62
Short-Term Debt 288 277 11
Other Current Liabilities 1,401 1,098 303
Total Current Liabilities 6,862 6,486 376
What is the Net Working Capital for 2014? What is it for 2013? What is the Change in Net Working Capital (NWC)? Assuming the Operating Cash Flows (OCF) are 7,155 and the Net Capital Spending (NCS) is 2,372, what is the Cash Flow from Assets?
What will be an ideal response?
Question 2
Cash flow from assets shows the success or failure of the operating decisions, while cash flow to creditors examines a portion of how the firm is financing the operations.
Indicate whether the statement is true or false.
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Answer to Question 1
Answer:
Net Working Capital for 2014 is 8,752 - 6,862 = 1,890
Net Working Capital for 2013 is 10,083 - 6,486 = 3,597
Decrease in Net Working Capital (NWC) = 1,890 - 3,597= -1,707
Assuming that Operating Cash Flows (OCF) are 7,155, Net Capital Spending (NCS) is 2,372, and Decrease in Net Working Capital is -1,707, we get:
Cash Flow from Assets = OCF - NCS Decrease in NWC = 7,155 - 2,372 - (-1,707) = 6,490.
Answer to Question 2
Answer: TRUE