Question

Question 4: A company had a $51 000 net loss for 2019. A dividend of $19 000 was paid during the year and depreciation expense for 2019 was $14 000. The balance sheet records the following working capital accounts as below. Calculate whether this company generated any cash from its operations during 2019.

	1 January 2019    ($)	31 December 2019   ($)
Cash	12500	10500
Inventory	15000	9000
Prepayments	5000	2000
Accounts Receivable	11000	15000
Accounts Payable	10000	11000
Accruals	7000	8000

Answer 1

Cash from Operation during 2019:

Explanation:

1) Cash Flow From Operating Activities;

Net Loss	-51,000
Adjustment to Cash
Dep. Exp	$14,000
Decrease in Inventory (15,000 -9000)	$6000
Decrease in Prepayments ( 5000 -2000)	$3000
Increase in Account Receivable (11,000- 15,000)	-4000
Increase in Account Payable( 10,000 -11000)	1000
Increase in Accruals( 7000 -8000)	1000
Income from Operation	-$30,000

So, we can say it has not generated cash from it operation during 2019.( as cash flow is negative)