..Below are the financial statements from which you'll derive the Free Cash Flows Identity:

CASH FLOWS FROM ASSETS CASH FLOWS TO CREDITORS + CASH FLOWS TO

SHAREHOLDERS

The income statement for each year will look like this:

Income Statement

2014

2015

Sales

$385,724

$470,172

Cost of goods sold

196,619

248,263

Selling and administrative

38,668

50,469

Depreciation

55,506

62,738

EBIT

$94,931

$108,702

Interest

12,067

13,831

EBT

$82,864

$94,871

Taxes

24,859

28,461

Net income

$58,005

$66,410

Dividends

$23,202

$26,564

Addition to retained earnings

$34,803

$39,846

2.The balance sheet for each year will be:

Balance Sheet as of Dec. 31, 2014

Cash

$28,372

Accounts payable

$20,143

Accounts receivable

20,104

Notes payable

22,855

Inventory

38,706

Current liabilities

$42,998

Current assets

$87,182

Long-term debt

$123,607

Net fixed assets

$244,881

Owners' equity

$165,458

Total assets

$332,063

Total liab. and equity

$332,063

Balance Sheet as of Dec. 31, 2015

Cash

$42,865

Accounts payable

$34,091

Accounts receivable

26,078

Notes payable

24,955

Inventory

52,057

Current liabilities

$59,046

Current assets

$121,000

Long-term debt

$140,000

Net fixed assets

$298,350

Owners' equity

$220,304

Total assets

$419,350

Total liab. and equity

$419,350

Cash Flow From Assets: Operating Cash flows - Net Investments + Depreciation - Change in Net

Working Capital

1.Using the OCF equation we have OCF = EBIT- Taxes+ Depr.

The OCF for each year is:

2014 $ _______&2015$_______

2The capital spending and change in net working capital. The capital spending for the year was:

Capital spending

Ending net fixed assets Yr1

$

- Beginning net fixed assets Yr0

$

+ Depreciation

$

Net capital spending$

3..And the change in net working capital was:

Change in net working capital

Ending NWC

$

- Beginning NWC

$

Change in NWC

$

Cash flow from assets

Operating cash flow

$_______

- Net capital spending

________

- Change in NWC

Cash flow from assets

$

==========

5.The cash flow to creditors was:

Cash flow to creditors

Interest paid

$______

- Net new borrowing

$

Cash flow to creditors

$

6.The cash flow to stockholders was:

Cash flow to stockholders

Dividends paid

$______

- Net new equity raised

$_______

Cash flow to Sharekolders

$----------

THEREFORE, Cash flow from assets cash flows to creditor + Cash flow to shareholders.

$ __________$ ___________ +$ ____________

Explain in words the meaning of the above in terms of balance sheet sources & uses of cash as we did in class.

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