In this workout, we're asked to calculate the cash flows available for debt service for Pizza Plc for years 0 through 8 We're provided with an income statement exert and underneath that a cash flow statement exert If we think about what we need for cash flows available for debt service, we're going to be starting off with operating profit Then we need to take off tax, tax is a real cash flow. It has to be paid, it's not going to be available for debt service But then we need to go looking for any other cash flows Operating cash flows that have to happen before debt servicing can happen So I scroll down And at the bottom we've got some labels here already, I need to start with my operating profit for year zero I scroll up to my income statement and there it is, 650 that's my starting point I've then got my effective tax rate, so I can calculate NOPAT (Net Operating Profit After Tax) So I hit equals, go to the 650 and I times that by open brackets one minus the tax rate Giving me 445 However, implicit within the operating profit is an item that isn't actually a cash flow (depreciation and amortization) So we need to add back D&A. I go up to my cash flow statement, find D&A and there it is. It's 100 that need to be added back Great! We're now looking for any other operating cash flows And we're going to start by looking at the cash flows from operating activities section of the cash flow statement So scroll up and what items do we see? Decrease or increase in OWC (operating working capital), so I'll grab that I now need to go looking for any other cash flows that also need to happen and capex (capital expenditure) is another good one And that's in our investing part of the cash flow statement That just about gets me through all of it, so I now start at NOPAT, I add up everything down And I get to 434.3 What I can now do is copy all of those to the right And we'll work out our cash flows available for debt service in every year, up to and including year 8 And there we've got them at the bottom Ending with 574.5 in the final year