At the beginning of the year, Nothing More Corporation had a long-term debt balance of $37,304. During the year, the company repaid a long-term loan in the amount of $9,964. The company paid $3,760 in interest during the year, and opened a new long-term loan for $8,800. What was the cash flow to creditors during the year?
The cash flow to creditors, in the context of a cash flow statement, refers to the net cash inflows and outflows related to borrowings. In the case of Nothing More Corporation:
At the beginning of the year, the long-term debt balance was $37,304. During the year, the company: - Repaid a long-term loan of $9,964, - Paid $3,760 in interest, and - Opened a new long-term loan of $8,800.
The cash flow to creditors during the year can be calculated as follows:
- A decrease in debt of $9,964 (repayment of the old loan)
- An increase in debt of $8,800 (new loan)
The net cash flow to creditors would be the sum of these two transactions:
Net Cash Flow to Creditors = New Borrowings - Repayments Net Cash Flow to Creditors = $8,800 (new loan) - $9,964 (repaid loan)
Net Cash Flow to Creditors = $8,800 - $9,964 Net Cash Flow to Creditors = -$1,164
So, the cash
