Determine the operating cash flow, Financial Management

Determine the operating cash flow:

E4-1 The installed cost of a new computerized controller was $65,000. Calculate the depreciation schedule by year assuming a recovery period of 5 years and using the appropriate MACRS depreciation percentages given in Table 4.2 on page 117.


(1)   65,000                                     20%                                        13,000

(2)   65,000                                     32                                            20,800

(3)   65,000                                     19                                            12,350

(4)   65,000                                     12                                              7,800

(5)   65,000                                     12                                              7,800

(6)   65,000                                       5                                              3,250

    Totals                                              100%                                      65,000

E4-2 Classify the following changes in each of the accounts as either an inflow or an outflow of cash. During the year (a) marketable securities increased, (b) land and buildings decreased, (c) accounts payable increased, (d) vehicles decreased, (e) accounts receivable increased, and (f) dividends were paid.


(a)   Marketable securities                                    cash outflow

(b)   land and buildings decreased                       cash inflow

(c)    accounts payable increased                          cash inflow

(d)   vehicles decreased                                          cash inflow

(e)    accounts receivable increased                       cash outflow

(f)    dividends were paid                                       cash outflow


E4-3 Determine the operating cash flow (OCF) for Kleczka, Inc., based on the following data. (All values are in thousands of dollars.) During the year the firm had sales of $2,500, cost of goods sold totaled $1,800, operating expenses totaled $300, and depreciation expenses were $200. The firm is in the 35% tax bracket.



Operating Cash Flow

Kleczka, Inc.


Sales                                                                                            2500

Less: Cost of Goods Sold                                                          -1800

Gross Profit                                                                                   700

Less: Operating Expenses                                                          - 300

Operating Income                                                                          400        

Add: Depreciation                                                                          200  

Operation Cash Flow                                                                     600

Less Tax                                                                                           210

Net Operating Cash Flow                                                               390



E4-4 During the year, Xero, Inc., experienced an increase in net fixed assets of $300,000 and had depreciation of $200,000. It also experienced an increase in current assets of $150,000 and an increase in accounts payable and accruals of $75,000. If operating cash flow (OCF) for the year was $700,000, calculate the firm's free cash flow (FCF) for the year.


Operating Cash                                                  700,000

Depreciation                                                      +200,000


Increase in current assets                                 - 150,000


Increase in current Liabilities                              75,000


E4-5 Rimier Corp. forecasts sales of $650,000 for 2013. Assume the firm has fixed costs of $250,000 and variable costs amounting to 35% of sales. Operating expenses are estimated to include fixed costs of $28,000 and a variable portion equal to 7.5% of sales. Interest expenses for the coming year are estimated to be $20,000. Estimate Rimier's net profits before taxes for 2013.


Rimier Corp

Pro Forma

Income Statement 2007


Sales Revenue                                                                                       650,000

Less: Cost of Goods Sold

            Fixed Cost                                                                                  250,000

            Variable Cost (0.35 x sales)                                                      227,500

Gross Profits                                                                                           172,500

Less: Operating Expenses

            Fixed Expense                                                                               28,000

            Variable Expense (0.075 x sales)                                                  48,750

Operating Profits                                                                                       95,750

Less: Interest Expense (all fixed)                                                              20,000

Net Profits before Taxes                                                                            75,750

Posted Date: 2/12/2013 5:19:41 AM | Location : United States

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