Assignment
Finding operating and free cash flows Consider the following balance sheets and selected data from the income statement of Keith Corporation.
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Keith Corporation Balance Sheets
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December 31
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Assets
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2015
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2014
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Cash
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$ 1,500
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$ 1,000
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Marketable securities
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1,800
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1,200
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Accounts receivable
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2,000
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1,800
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Inventories
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2,900
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2,800
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Total current assets
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$ 8,200
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$ 6,800
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Gross fixed assets
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$29,500
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$28,100
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Less: Accumulated depreciation
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14,700
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13,100
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Net fixed assets
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$14,800
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$15,000
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Total assets
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$23,000
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$21,800
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Liabilities and stockholders' equity
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Accounts payable
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$ 1,600
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$ 1,500
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Notes payable
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2,800
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2,200
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Accruals
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200
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300
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Total current liabilities
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$ 4,600
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$ 4,000
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Long-term debt
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5,000
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5,000
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Total liabilities
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$ 9,600
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$ 9,000
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Common stock
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$10,000
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$10,000
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Retained earnings
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3,400
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2,800
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Total stockholders' equity
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$13,400
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$12,800
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Total liabilities and stockholders' equity
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$23,000
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$21,800
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Keith Corporation Income Statement Data (2015)
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Depreciation expense
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$1,600
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Earnings before interest and taxes (EBIT)
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2,700
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Interest expense
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367
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Net profits after taxes
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1,400
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Tax rate
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40%
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a. Calculate the firm'snet operating profit after taxes (NOPAT)for the year ended December 31, 2015.
b. Calculate the firm'soperating cash flow(OCF) for the year ended December 31, 2015.
c. Calculate the firm'sfree cash flow(FCF) for the year ended December 31, 2015.
d. Interpret, compare, and contrast your cash flow estimates in parts b and c.