[tm010433]

Crabtree, Inc. has an operating cash flow of $164,900, depreciation expense of $93,100, and taxes paid of $80,400. A partial listing of its balance sheet accounts is as follows:

Beginning Balance Ending Balance
Current assets 131,700 119,600
Net fixed assets 712,500 689,200
Current liabilities 108,900 122,100
Long Term 796,000 830,500



What is the amount of Crabtree's cash flow from assets?

[SFAUTO]

I am not sure what "cash flow from assets" means. However, I will provide you with the Free Cash Flow calculation (ie, cash available to pay debt). I will assume that your operating cash flow ("OCF") excludes depreciation (a non cash item) so does not have to be adjusted, and also excludes taxes (a cash item) so has to be adjusted. The formula is as follows:

OCF
-Taxes
-increase (+dec) in working capital changes
- Capex
----------------------
FCF

Where Capex is calculated as Ending Net Fixed Assets balance - Beginning Net Fixed Assets balance + Dep. This comes out to $69,800.

Where Working Capital Changes is calculated as Beg. Curr assets-curr liab. Minus ending curr assets-curr liab. This comes out to $25,300.

Therefore, your FCF is $40,000 and is calculated by:

$164,900
-80,400 (taxes)
+25,300 (dec in net working capital)
-69,800 (capex)

You can thank the company's CFO or treasury staff for stretching the payables and collecting the receivables, or the operations dept for turning the inventory faster. Without this decrease in working captal, which became a source of cash, cash flow would have been lower and maybe even negative. Things may be tight since Crabtree has some long term debt on which I am assuming they are paying interest and principal.

I hope that helps.