This is from the sample exam in schweser. #50 An analyst gathered the following data about a company: Net sales = 4000 Dividends declared = 170 Cost of goods sold = 2000 Othercash expenses for inputs = 500 Long-term debt principal repayment = 250 Cash tax payments = 200 Purchase of new equipment = 300 Inventory increased by 100 Accounts payable increased 300 Depreciation expense = 75 The company’s cash flow from operations is : A. $1200 B. $1500 C. $1405 D. $1575 What confuses me is since we know the COGS and inventory change, we can calculate the purchases = 2100 but what are ‘other cash expenses for inputs’? Are inputs inventory purchases?
Net Income 4000-2000-500-200+75 = 1375 Balance sheet adj: 1375 -100+300 = 1575 D
B. Net sales = 4000- Cost of goods sold = 2000 - Othercash expenses for inputs = 500 - Cash tax payments = 200 - Inventory increased by 100 + Accounts payable increased 300
Cash from Customers = Net Sales + Delta AR = 4000 Cash paid to Suppliers: COGS + Delta AP + Delta Inv = -2000 + 300 - 100 = -1800 Other Cash expenses = -500 (SG&A expenses e.g.) Tax = -200 Interest = 0 Total CFO = 4000 - 1800 - 500 - 200 = 1500
Agree with highpark. Dep. would be added back if using indirect method, but not direct.
The answer is B.
CFO: Net sales +4000 COGS -2000 Other cash expense -500 Cash tax -200 Inventory increase -100 AP increase +300 =================== CFO = 1500 B? Others are not included in CFO: Dividend declared: not paid yet, no cash outflow. LT debt principal repayment: CFF Purchase of new equipment: CFI Depreciation expense: noncash transaction