Question

The Operating activities section of Filler-Up, Inc.’s Statement of Cash Flows for the year ended December...

The Operating activities section of Filler-Up, Inc.’s Statement of Cash Flows for the year ended December 31, 20x2 and 20x1, includes the following items:

(in $ millions)

Fye 20x2

Fye 20x1

Cash flows from operating activities:

Net earnings

$359.7

$314.6

Depreciation

51.2

50.2

Change in accounts receivable; (increase) decrease

(42.0)

(43.4)

Change in accounts payable; increase (decrease)

8.4

16.6

Net cash provided by operating activities

$392.6

$329.3

Required

Answer the following questions:

  1. Why does the company add back depreciation to compute net cash provided by operating activities? Is depreciation a source of cash?
  2. The company reports cash flows associated with accounts receivable. In 20x1, this item is a cash outflow of $43.4 million and in 20x2 this item is a cash outflow of $42.0 million. Explain why this item is on the statement.
  3. Did Filler-Up Inc.’s accounts payable increase or decrease during 20x2? How do you know?
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