Gorman Distributors shows the following information on its 2014 income statement:
sales = $300,000;
costs = $200,000;
other expenses = $40,000;
depreciation expense = $30,000;
interest expense = $2,000;
taxes = $20,000;
dividends = $10,000.
In addition, you're told that:
-the firm issued $4,500 in new equity during 2014,
-redeemed $6,500 in outstanding long-term debt.
If net fixed assets increased by $7,000 during the year, what was the addition to net working capital?
OCF = EBIT + Depr - Tax
NCS = Change in Net fixed asset + Depr
CFCR = Interest - (Net new borrowing) = ??
CFSH = = Dividend - (Net new equity) = ??
From Cash flow identity:
CFFA = OCF - NCS - Change in NWC = CFCR + CFSH
Change in NWC =