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A firm had after-tax income last year of $2.1 million. Its depreciation expenses were $0.5 million,...

A firm had after-tax income last year of $2.1 million. Its depreciation expenses were $0.5 million, and its total cash flow was $2.1 million. What happened to net working capital during the year? (Enter your answer in millions rounded to 1 decimal place.)

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Answer #1

The Operating Cash Flow Calculation is operating income before depreciation minus taxes and adjusted for changes in working capital..

=> Operating cash flow = net income after tax+depreciation(+) or (-) working capital changes

In the given question we have all the information except for working capital changes..

=>

$2.1 million = $2.1million + $0.5 million (+) or (-) working capital changes

= Working capital change will be (-)$0.5 million after solving the above equation..

=> There is a decline in the working capital of the firm to the extent of $0.5 million.

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