I am not following how to arrive at the answer to the following question:
Southwick Inc. had an EBIT of 175,000, depreciation expense of 18,500, and paid 40,000 in taxes. Its interest costs were $10,000; its long-term borrowing reduced by $6,000; it raised $8,000 in new equity; and paid $22,000 in dividends. If the net capital spending was $20,000, what was the change in net working capital?
Here is the solution, but I am not following the steps in how it came to be:
CF Assets =
CF Creditors 16,000 + CF Stockholders 14,000
or CF Assets = 30,000
Change in NWC =
OCF 153,500 – NetCapSpending -20,000 – CFAssets -30,000
or Change in NWC = 103,500
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