During the past year, Ernst Electrical Services paid $36,800 in interest along with $48,000 in dividends. The company issued $130,000 of stock and $100,000 of new debt. The company reduced the balance due on the old debt by $225,000. What is the amount of the cash flow to creditors?

Question

Quizplus · Accepted Answer

The cash flow to creditors is calculated as interest paid plus net debt repayment. Interest paid is $36,800. The net debt repayment is $225,000 (old debt reduced) minus $100,000 (new debt issued), which equals $125,000. Therefore, the cash flow to creditors is $36,800 + $125,000 = $161,800.

During the Past Year, Ernst Electrical Services Paid $36,800 in Interest