Question

Calculate the Cash Flow from Operating Activities for 2018

Jenny's Retail USA
12/31/2018
Balance Sheet
in $000
	2017	2018
Cash	27	5
A/R	30	31
Inventory	11	30
Total Current Assets	68	66
Gross Plant & Equipment	140	180
Less: Depreciation	(40)	(50)
Net Plant & Equipment	100	130
Total Assets	168	196
Liabilities
A/P	15	14
Accruals	15	2
Current Liabilities	30	16
Long-term Debt	50	76
Common Stock	15	25
RE	73	79
Total Liabilities & Equity	168	196

Jenny's Retail USA
12/31/2018
Income Statement
in $000
Revenue	35
COGS	5
Gross Margin	30
Expense	7
Depreciation	10
EBIT	13
Interest	2
EBT	11
Taxes	5
Net Income	6

Answer 1

While Preparing Cash Flow From Operating Activites, following points to be taken into consideration:

1. Increase in current assets are treated as cash outflow.

2. Decrease in current assets are treated as cash inflow.

3. Increase in current liabilities are treated as cash inflow.

4. Decrease in current liabilities are treated as cash outflow.

Cash flow statement from Operating Activities are as follow:

PARTICULAR	AMOUNT	AMOUNT
Cash Flow From Operating Activities:
Net Profit as Per Income Statement	6,000.00
Add:
Tax	5,000.00
Interest(Being Form part of Financing Activites)	2,000.00
Depriciation (Non Cash Item)	10,000.00
Net Operating Income before Working Capital Change (a)	23,000.00
Adjustment for Working Capital Change:
Increase in Account Receivable	-1,000.00
Increase in Inventory	-19,000.00
Decrease in Account Payable	-1,000.00
Increase in Accurals	-13,000.00
Net effect of Working Capital Change(b)	-34,000.00
Cash flow from Operating Activities Before Tax(a+b)	-11,000.00
Less: Tax	- 5,000.00
Net Cash flow from Operating Activites (A)		-16,000.00

Further, you can refer below to understand cash flow from investing and financing activities

Cash Flow From Investing Activities:
Increase in Net Fixed Assets (Refer Note1)		-40,000.00
Net Cash Flow from Investing Activites (B)		-40,000.00
Cash Flow From Financing Activities:
Increase in Common Stock		10,000.00
Interest		-2,000.00
Increase in Long Term Debt		26,000.00
Net Cash Flow from Financing Activities (C)		34,000.00
Net Cash Flow from All Activities (A+B+C)		-22,000.00
Add: Opening Balance of Cash		27,000.00
Reconcile with Closing Balance of Cash		5,000.00

	Fixed Asset A/c (Note1)
Particular	Amount	Particular	Amount
Opening Balance	1,00,000.00	Depriciation	10,000.00
Bank i.e. Purchase (Balance Figure)	40,000.00	Closing Balance	1,30,000.00
Total	1,40,000.00	Total	1,40,000.00

	Retained Earnings A/c (Note2)
Particular	Amount	Particular	Amount
		Opening Balance	73,000.00
Closing Balance	79,000.00	Net Profit	6,000.00
Total	79,000.00	Total	79,000.00

Thus, there are no outflow in form of dividend.