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Financial Statements Analysis: Operating Cash Flow & Capital Spending

Understand financial statements with calculation examples for operating cash flow and net capital spending. Analyze Barrett, Inc. and Gordon Driving School case studies to determine OCF and capital spending. Learn how to calculate FCF and interpret statements for Ritter Corporation. Enhance your financial analysis skills!

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Financial Statements Analysis: Operating Cash Flow & Capital Spending

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  1. Questions-Financial Statements

  2. Q1) • 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?

  3. Q2) • 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?

  4. Q3) • Ritter Corporation’s accountants prepared the following financial statements for year-end 2015. • OFCF? • FCF?

  5. 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

  6. Q4) • OFCF? • FCF?

  7. 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)=(1239+503+418-686)-(1187+227+522-613) • =1474-1323=151 • =634-162+311-337-151=295 • FCF=NI+Depreciation-CAPEX+ΔLT Debt-ΔWC • ΔLT Debt=LT Debt(2015)-LT Debt (2014)=1300-1350=-50 • =302+311-337+(-50)-151=75

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