Carlisle Express paid $1,282 in interest and $975 in dividends last year. Current assets increased by $2,700, current liabilities decreased by $420, and long-term debt increased by $2,200. What was the cash flow to creditors?

Question

Quizplus · Accepted Answer

The cash flow to creditors is the sum of the interest paid and the change in long-term debt. Therefore, Cash Flow to Creditors = Interest Paid + (Change in Long-term Debt) = $1,282 + $2,200 = $3,482. However, since the long-term debt increased, we have a cash outflow which is represented by a negative sign. Therefore, the cash flow to creditors is -$3,482. Additionally, the decrease in current liabilities would increase cash flow to creditors, but this effect is not large enough to offset the increase in long-term debt. Thus, the answer is B: -$918.

Carlisle Express Paid $1,282 in Interest and $975 in Dividends