Question

In 2019, Firm X has cash flow from operating activities of $1500, depreciation $200, interest expenses $300, tax rate 20 percent. Compared to 2018, Cash increase $200, accounts receivable increases $150, inventory decreases $230, accounts payable increases $210, other current liabilities increase $100. There is no deferred tax. What is the operating cash flow of Firm X in 2019?

A) $1690

B) $1880

C) $1410

D) $2190

E) $1720

Answer 1

Operating cash flow represents the cash impact of a company's net income (NI) from its primary business activities. Operating cash flow, also referred to as cash flow from operating activities, is the first section presented on the cash flow statement.

Operating cash flows concentrate on cash inflows and outflows related to a company's main business activities, such as selling and purchasing inventory, providing services, and paying salaries. Any investing and financing transactions are excluded from operating cash flows section and reported separately, such as borrowing, buying capital equipment, and making dividend payments. Operating cash flow can be found on a company's statement of cash flows, which is broken down into cash flows from operations, investing, and financing.

Examples of the direct method of operating cash flow include:

• Salaries paid out to employees
• Cash paid to vendors and suppliers
• Cash collected from customers
• Interest income and dividends received
• Income tax paid and interest paid

calculation: 1500+ 200- 300 - (1500*20%) = 1100

depreciation is a non cash expense. so we want to add back.

cash increased (200) = 1100+200= 1300

accounts receivable increased (150) = 1300-150= 1150

inventory decrease 230 = 1150+230= 1380

accounts payable increase 210 = 1380+210 = 1590

current liability increase 100 = 1590 + 100 = 1690

So the answer is option a)$1690.