Chapter 2, Problem 21QP

a)

Summary Introduction

To calculate: The net income for 2011

Introduction:

Cash flow refers to the difference between the cash that comes into the business and the cash that goes out of the business. The following are the different types of cash flows in a corporation:

• Cash flow from assets:

  It refers to difference between the revenues from the sale of assets and the money invested in purchasing the assets.

• Cash flow to creditors:

  It refers to the interest paid to the creditors minus the net fresh debt borrowed by the company.

• Cash flow to stockholders:

  It refers to the dividend paid to the shareholders of the company minus the fresh equity raised by the company.

• Operating cash flow:

  It refers to the cash flow from operating activities of the firm.

b)

Summary Introduction

To calculate: The operating cash flow for 2011

Introduction:

Cash flow refers to the difference between the cash that comes into the business and the cash that goes out of the business.

c)

Summary Introduction

To calculate: The cash flow from assets for 2011 and the possibility of having negative cash flow from assets

Introduction:

Cash flow refers to the difference between the cash that comes into the business and the cash that goes out of the business.

d)

Summary Introduction

To calculate: The cash flow to creditors and the cash flow to stockholders’

Introduction:

Cash flow refers to the difference between the cash that comes into the business and the cash that goes out of the business.