Question

Calculate the Operating Cash Flow from the following data: Change in net fixed assets 20,000 Change in net working capital 25,000 Dividends Paid 30,000 Depreciation Expense 35,000 Interest Paid 20,000 Net New Borrowing (15,000) Net New Equity Issued 10,000

Answer 1

Operating Cash Flows (as the name suggests) includes cash flows only from operating activities of the firm. The cash flows given in the problem can be classifed as described below:

Change in Net Fixed Assets (Investing Cash Flow)

Change in Net Working Capital (Operating Cash Flow)

Dividends Paid (Financing Cash Flow)

Depreciation Expense (Non-Cash Expense)

Interest Paid (Operating Cash Flow)*

*Only under US GAAP. Under IFRS interest paid can be classified both as operating and financing cash flow.

Net New Borrowing (Financing Cash Flow)

Net New Equity Issued (Financing Cash Flow)

Therefore, Operating Cash Flow = Change in Net Working Capital + Interest Paid = 25000 + 20000 = $ 45000 (cash outflow is assumed to be positive hence $ 45000 has no negative sign before it)