Tax rate 35% 2020 2019 Revenues $42,629 $37,911 Cost of goods sold 23,704 24,832 Interest 1,230 1,584 Dividends 1,200 600 Depreciation 2,609 2,814 Administrative expenses 7,040 6,820 Cash 3,671 2,969 Inventory 3,968 4,503 Accounts payable 2,325 3,760 Long-term debt 19,105 25,900 Accounts receivable 4,601 5,318 Common stock 22,600 19,800 Net fixed assets 41,260 42,110 (2) What is the Net Debt to Operating Cash Flow Ratio in 2020

The Net Debt to Operating Cash Flow Ratio in 2020 is:

2.26

Explanation:

a) Data and Calculations:

Tax rate 35%

                                           2020        2019

Revenues                     $42,629    $37,911

Cost of goods sold         23,704     24,832

Interest                               1,230       1,584

Dividends                           1,200         600

Depreciation                     2,609       2,814

Administrative expenses 7,040       6,820

Cash                                  3,671       2,969

Inventory                          3,968       4,503

Accounts payable            2,325       3,760

Long-term debt               19,105    25,900

Accounts receivable        4,601        5,318

Common stock             22,600      19,800

Net fixed assets            41,260       42,110

Cash Flow from operations:

                                          2020        2019

Revenues                     $42,629    $37,911

Cost of goods sold         23,704     24,832

Interest                               1,230       1,584

Administrative expenses 7,040       6,820

Net cash flow                      $10,655

Working capital adjustment:

Inventory                                    535 (-3,968 + 4,503)

Accounts payable                  (1,435) (-2,325 + 3,760)

Accounts receivable                  717  (-4,601 + 5,318)

Net cash from operations $10,472

Total debt:

Long-term debt = $19,105

Current debt =         4,601

Total debt =         $23,706

Cash flow-to-debt ratio = Total debt/Net cash from operations

= $23,706/$10,472

= 2.26

b) The cash flow-to-debt ratio is the ratio of a company's cash flow from operations to its total debt, which shows how long (2.26 years) it takes the company to repay its debt if it devoted all of its cash flow to debt repayment.

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