Cash Flow
P2-2, Cash Flow Analysis
FI360
Given the balance sheets and selected data from the income statement of SMG Industries that follow, answer parts (a)-(c)
Calculate the firms operating cash flow (ocf) for the year ended December 31, 2009, using Equation 2.1
OCF=EBIT-taxes +depreciation
4,500-1,300+1,600= 4,800
Calculate the firms free cash flow (fcf) for the for the year ended December 31, 2009, using Equation 2.2
FCF = OCF – FA – ( CA – A/P – accurals)
FA = 31,500 – 30,100 = 1400
CA = 33,000 – 31,800 = 1200
A/P = 3,600 – 3,500 = 100
accruals = 1,200 – 1,300 = -100
FCF = 4,800 – 1400 – (1,200 – 100 -100)
= 4,800 – 1,400 – 1000
= 2,400
Interpret, compare, and contrast your cash flow estimates in parts (a) and (b).
The Operating Cash Flow for 2008 thru 2009 has increased by $300. The Free Cash Flow shows an increase of $2400 despite the $100 deficit in the accrual for the 12/31/09 year.
Classify each of the following items as an inflow (I) or an outflow (O) of cash or (N)
Change ($)
Accounts Payable
-1200
Notes Payable
Long-term debt
-2500
Inventory