Question

With an explanation, please!

Accounts payable	3,154.00	5,910.00
Accounts receivable	6,954.00	9,092.00
Accruals	5,609.00	6,027.00
Additional paid in capital	19,742.00	13,180.00
Cash	???	???
Common Stock	2,850	2,850
COGS	22,063.00	18,714.00
Current portion long-term debt	500	500
Depreciation expense	998.00	950.00
Interest expense	1,270.00	1,169.00
Inventories	3,060.00	6,731.00
Long-term debt	16,843.00	22,507.00
Net fixed assets	75,951.00	74,022.00
Notes payable	4,053.00	6,543.00
Operating expenses (excl. depr.)	19,950	20,000
Retained earnings	35,601.00	34,830.00
Sales	46,360	45,756.00
Taxes	350	920

What is the firm's cash flow from operations?

Submit

Answer format: Number: Round to: 0 decimal places.

Answer 1

Answer :

We have First Calculated the Net Profit of the Firm :

FOR NET PROFIT :

Note : 1. We have taken the data as current year and previous year  

2. COGS is Cost of Goods Sold and COGS = Opening Inventory + Purchases made - Closing Inventory

3. We have deducted depreciation, Interest and Tax for the calculation of Net Profit.

Now, On the basis of Net Profit we are going to compute Cash Flow from Operating Activity :

Note : 1. Depreciaton is added back because it is a non cash item , meaning it does not actually result in outflow of cash .

2. Interest expense is added back because it is part of Cash flow from Financing Activities since Interest has been paid on long term debt .

3. Adjustments have been made related t change in working capital

AN INCREASE IN ASSET , will result in outflow of cash

while , AN INCRESE in LIABILITY , will result in Inflow of cash and vice -vesa.

So, Inflow of cash is added and outflow is substracted.

So, the change in asets and liabilities is accounted for.

For Previous year we dont have figures to calculate Change but in Current yera we have taken changes in working capital.

  

So, Current year CASH FLOW FROM OPERATING ACTIVITIES is 5,977.