Hey guys would you mind helping me out with this question: A Company reported the following for the year: - Net sales $500 - Increase in A/R 20 - Decrease in A/P 40 - Increase in Inventory 30 - Sale of new Common stock 100 - Repayment of debt 10 - Depreciation 2 - Net Income 100 - Interest Expense of debt 5 The company’s Cash Flow from Operations (CFO) and Cash Flow from Investing (CFI) are closeted to: CFO CFI A. $12 $100 B. $12 $0 C. $92 $100 D. $92 $0 Thanks for the help!
Haven’t looked over the L1 material since June but I think this is right: Use the indirect method to calculate CFO NI = $100 ($20) increase in A/R ($40) decrease in A/P ($30) increase in inventory $2 plus non-cash expense (depreciation) CFO = $12 - Sale of new CS is a CFF inflow - repayment of debt is a CFF outlow - Interest Expense was already included in CFO as we calculated using the indirect method (already expensed on the income statement to arrive at net income). The question does not have any CFI activities. So, the answer is B
That’s correct. Thanks, got confused between Indirect and Direct.
A Company reported the following for the year: - Net sales $500 - Increase in A/R 20 - Decrease in A/P 40 - Increase in Inventory 30 - Sale of new Common stock 100 - Repayment of debt 10 - Depreciation 2 - Net Income 100 - Interest Expense of debt 5 CFO: 100 - 20 - 40 - 30 + 2 = 12 CFI : 0 CFF = -10 + 100 = 90