Use the following information for Ingersoll, Inc., (assume the tax rate is 30 percent): |...

Question:

Use the following information for Ingersoll, Inc., (assume the tax rate is 30 percent):

2013 2014
Sales $15,573 $15,336
Depreciation 1,741 1,816
Cost of goods sold 4,379 4,787
Other expenses 986 864
Interest 835 966
Cash 6,187 6,706
Accounts receivable 8,120 9,667
Long-term debt 20,560 24,836
Net fixed assets 51,064 57,030
Accounts payable 5,762 6,111
Inventory 14,419 15,368
Dividends 1,350 1,698

For 2014, calculate the cash flow from assets, cash flow to creditors, and cash flow to stockholders.

Cash flow from assets $
Cash flow to creditors $
Cash flow to stockholders $

Statement of Cash Flow for Decision Making

All stakeholders cannot make meaningful decisions without even taking a look at the company's cash flow statement. Cash flow is very important in the business because without cash or unable to generate cash from operations the company cannot survive even in the short run like payment to suppliers and payment to employees for salaries.

Answer and Explanation:

Cash flow from assets $562

{eq}Cash~Flow~from~Assets~=~Operating~Cash~Flow~+~Increase(Decrease)in~Working~Capital~+~Increase(Decrease)~in~Fixed~Assets {/eq}


In the cash flow statement, an increase in the current assets and the decrease in the current liabilities shall deduct from the operating cash flow.

{eq}Cash~Flow~from~Assets~=~9,373~-~1,547~-~949~-~349~-~5,966 {/eq}

Cash flow to creditors $4,145

{eq}Cash~flow~from~creditors~=~Interest~paid~-~Net~new~borrowings {/eq}


{eq}Cash~flow~from~creditors~=~131~-~4,276 {/eq}

Cash flow to stockholders $1,581

Equity is not given in this case thus we will compute for the equity in both 2013 and 2014.

Year 2013 2014
Cash 6,187 6,706
Accounts receivable 8,120 9,667
Inventory 14,419 15,368
Net fixed assets 51,064 57,030
Accounts payable (5,762) (6,111)
Long-term debt (20,560) (24,836)
Common Stock 53,468 57,824
Net Income 7,632 6,903
Dividends (1,350) (1,698)
Total Equity 59,750 63,029

{eq}Cash~flow~to~stockholders~=~Dividends~paid~-~Net~new~equity {/eq}


{eq}Cash~flow~to~stockholders~=~1,698~-~3,279 {/eq}


Learn more about this topic:

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Using the Statement of Cash Flows for Decision Making

from Accounting 101: Financial Accounting

Chapter 12 / Lesson 5
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