An analyst gathered the following information.
Net Sales $ 4,000
Dividends Declared 170
Cost of goods sold 2,000
Other cash expenses for inputs 500
Longterm debt principal repayment 250
Cash tax payments 200
Purchase of new equipment 300
Inventroy increased by 100
Accounts payable increased 300
Depreciation expense 75
The company’s cash flow from operations is:
A $1,200
B 1,500
C 1,405
D 1,575
I can’t come up to the right answer… If you know it, please help.作者: Mechanic 时间: 2013-4-3 16:28
CFO using the direct method:
Step 1: Revenues (4000)
+/ Decrease(increase) in accounts receivables (0, no information)
=Cash collected from customers
Step 2: +Cash investment income (0, no information)
Step 3: COGS (2000)
+/ Increase(decrease) in inventory (100)
+/ Decrease(increase) in accounts payable (+300)
=Cash paid to suppliers
Step 4: Salaries and wags expense(0, no information)
+/ Decrease(increase) in wages payable(0, no information)
= Cash paid to employees(0, no information)
Step 5: Other operating expenses (500)
+/ Increase(decrease) in prepaid expenses(0, no information)
+/ Decrease(increase) in accrued liabilities (0, no information)
= Cash paid for other operating expenses
Step 6: Cash paid for interest (0, no information)
Step 7: Cash paid for income taxes (200)
= CFO=40002000500100+300200=1500
Is it B?作者: whew1110 时间: 2013-4-3 16:32
Calculate the amount of Purchases first.
Purchases = COGS + Increase in inventory
Purchases = 2,000 + 100 = 2,100
Now calculate how much was actually paid for the inventory in cash versus how much was purchased on credit
Cash paid to suppliers = Purchases Increase in payables
= 2,100 300 = 1,800
Now take net sales and subtract any expense that affects cash flow from operations (ignore noncash expenses like depreciation and items that affect cash flow from financing)
= Net sales cash paid to suppliers other cash expenses for inputs cash tax payments
= 4,000 1,800 500 200 = $1,500
Someone please verify this?
