Financial Management 2-6 B

FREE CSH FLOWS FROM AN ASSET PERSPECTIVE


STEP 1: Compute after tax cash flows from operations


 EBT                                                                                                                          $ 110,000
(+) Interest expense                                                                                                      10,000
EBIT                                                                                                                           120,000
Depreciation                                                                                                                 30,000
EBITDA                                                                    27,100
Tax Expense                                      
Less change in tax payable                                             -
Cash Taxes                                                                                                                  27,100

After tax cash flows from Operations                                                                      122,900

STEP-2 Change in Net Operating Working CApital

Change in Current Assets:
Change in CAsh                                                        $1000
Change in MArketable securities                                 200
Change in A/c recieveables                                     (4,000)
Change in prepaid rent                                              (100)
Change in Inventory                                                43,000
Change in Current Assets                                        40,100
Change non-interest bearing current debt:

Change in A/c payable                                      $     7,000
Change in Accrued expenses                                   (1000)                    
Change in Non Interest bearing current debt            6,000
Change in net operating work capital                                                                         $(43,100)

STEP 3: Change in Long term Assets

Purchase of fixed assets                                         $ 34,000
Chan ge in other assets                                                  -
Net Cash used for Investment                                                                                      $(34,000)
Assets free Cas Flows                                                                                                     $ 54,800

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FREE CASH FLOWS FROM FINANCING PERSPECTIVE

Interest Expense                                                      $(10,000)
Less change in interst payable                                          -
Interest paid to lenders                                                                                                        $  (10,000)
Decrease in notes payables                                                                                                        (3000)
decrease in Long term Debt                                                                                                    (10,000)
Common Stock dividened                                                                                                      (31,800)
Financing free Cash Flows                                                                                                   $(54,800)