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Finding operating and free cash flows
Consider the balance sheets and selected data from the income statement of Keith Corporation that follow.
a. Calculate the firm's net operating profit after taxes (NOPAT) for the year ended December 31, 2019.
b. Calculate the firm's operating cash flow (OCF) for the year ended December 31, 2019.
c. Calculate the firm's free cash flow (FCF) for the year ended December 31, 2019.
d. Interpret, compare, and contrast your cash flow estimate in parts (b) and (c).
Assets 2019 2018 Cash $1,500 $1,020 Marketable securities 1,820 1,170 Accounts receivable 1,950 1,800 Inventories 2,880 2,800 Total current assets $8,150 $6,790 Gross fixed assets $29,480 $28,080 Less: Accumulated depreciation 14,690 13,090 Net fixed assets $14,790 $14,990 Total assets $22,940 $21,780 Liabilities and Stockholders' Equity Accounts payable $1,630 $1,480 Notes payable 2,780 2,250 Accruals 200 280 Total current liabilities $4,610 $4,010 Long-term debt $4,860 $4,900 Common stock $10,020 $10,020 Retained earnings 3,450 2,850 Total stockholders' equity $13,470 $12,870 Total liabilities and stockholders' equity $22,940 $21,780
Depreciation expense $1,600 Earnings before interest and taxes (EBIT) 2,680 Interest expense 375 Net profits after taxes 1,821 Tax rate 21%
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