Question
Red Barchetta Company paid $27,815 in dividends and $28,752 in interest over the past year. During the year, net working capital increased from $13,674 to $18,394. The company purchased $42,770 in fixed assets and had a depreciation expense of $17,120. During the year, the company issued $25,175 in new equity and paid off $21,245 in long-term debt. What was the company's cash flow from assets?
Answers
GPT-4o mini
To calculate the Cash Flow from Assets (CFFA), we can use the following formula:
\[
\text{CFFA} = \text{Operating Cash Flow} - \text{Capital Expenditures} - \text{Changes in Net Working Capital}
\]
**Step 1: Calculate Operating Cash Flow (OCF)**
Operating Cash Flow can be determined using the formula:
\[
\text{OCF} = \text{Net Income} + \text{Depreciation} - \text{Dividends} - \text{Interest}
\]
However, since we do not have net income, we can directly focus on the cash flows that relate to operating cash:
Given:
- Depreciation = $17,120
- Dividends Paid = $27,815
- Interest Paid = $28,752
Since we are provided with dividends and interest but lack the net income, we can't strictly calculate OCF without additional information about revenues and expenses. However, for cash flows from assets, we might need only capital expenditures and changes in working capital.
**Step 2: Calculate Capital Expenditures (CapEx)**
Given that the company purchased fixed assets, this is the capital expenditures figure:
- Capital Expenditures (CapEx) = $42,770
**Step 3: Calculate Changes in Net Working Capital (NWC)**
The change in Net Working Capital is:
\[
\Delta \text{NWC} = \text{Ending NWC} - \text{Beginning NWC}
\]
\[
\Delta \text{NWC} = 18,394 - 13,674 = 4,720
\]
**Step 4: Plug values into Cash Flow from Assets formula**
Now that we have all the components needed, substitute them into the CFFA formula:
\[
\text{CFFA} = \text{OCF} - \text{CapEx} - \Delta \text{NWC}
\]
Although we do not directly know OCF due to lacking Net Income, we will focus on CapEx and NWC changes for the calculation.
So restructuring to calculate Cash Flows related to Investments:
\[
\text{CFFA} = - \text{CapEx} - \Delta \text{NWC}
\]
\[
\text{CFFA} = -42,770 - 4,720 = -47,490
\]
Thus, **the company's cash flow from assets is:**
\[
\text{CFFA} = -47,490
\]
This indicates that the company had a cash outflow of $47,490 from its assets during the year.
\[
\text{CFFA} = \text{Operating Cash Flow} - \text{Capital Expenditures} - \text{Changes in Net Working Capital}
\]
**Step 1: Calculate Operating Cash Flow (OCF)**
Operating Cash Flow can be determined using the formula:
\[
\text{OCF} = \text{Net Income} + \text{Depreciation} - \text{Dividends} - \text{Interest}
\]
However, since we do not have net income, we can directly focus on the cash flows that relate to operating cash:
Given:
- Depreciation = $17,120
- Dividends Paid = $27,815
- Interest Paid = $28,752
Since we are provided with dividends and interest but lack the net income, we can't strictly calculate OCF without additional information about revenues and expenses. However, for cash flows from assets, we might need only capital expenditures and changes in working capital.
**Step 2: Calculate Capital Expenditures (CapEx)**
Given that the company purchased fixed assets, this is the capital expenditures figure:
- Capital Expenditures (CapEx) = $42,770
**Step 3: Calculate Changes in Net Working Capital (NWC)**
The change in Net Working Capital is:
\[
\Delta \text{NWC} = \text{Ending NWC} - \text{Beginning NWC}
\]
\[
\Delta \text{NWC} = 18,394 - 13,674 = 4,720
\]
**Step 4: Plug values into Cash Flow from Assets formula**
Now that we have all the components needed, substitute them into the CFFA formula:
\[
\text{CFFA} = \text{OCF} - \text{CapEx} - \Delta \text{NWC}
\]
Although we do not directly know OCF due to lacking Net Income, we will focus on CapEx and NWC changes for the calculation.
So restructuring to calculate Cash Flows related to Investments:
\[
\text{CFFA} = - \text{CapEx} - \Delta \text{NWC}
\]
\[
\text{CFFA} = -42,770 - 4,720 = -47,490
\]
Thus, **the company's cash flow from assets is:**
\[
\text{CFFA} = -47,490
\]
This indicates that the company had a cash outflow of $47,490 from its assets during the year.