Question

Balance Sheet
				Year 1	Year 2	Change
Cash				100	70	(30)
Accts Receivable				500	800	300
Inventory				800	700	(100)
Current Assets				1,400	1,570	170
Gross Fixed Assets				2,500	2,800	300
Accum Depreciation				(500)	(700)	(200)
Net Fixed Assets				2,000	2,100	100
Total Assets				3,400	3,670	270
Accts Payable				300	150	(150)
Accured Liabilities				200	300	100
Current Liabilities				500	450	(50)
Long-term Debt				1,900	2,130	230
Total Liabilities				2,400	2,580	180
Common Stock				200	220	20
Retained Earnings				800	870	70
Total Common Equity				1,000	1,090	90
Total Liab & Equity				3,400	3,670	270

Net Income = 120; Depreciation = 200; Dividends = 50

Calculate Cash Flow from Operations on the Statement of Cash Flow (this is not operating cash flow). Remember to use the Change column.

Answer 1

Calculation of cash flow from operation is shown below
Net income	$120
Adjustment to reconcile net income to cash flow from operating activities
Depreciation expense	$200
Changes in working capital
Increase in accounts receivable	-$300
Decrease in inventory	$100
Decrease in accounts payable	-$150
Increase in accrued liabilities	$100
Net cash provided by operating activities	$70
Thus, cash flow from operations is $70.