Question

INCOME STATEMENT:

	2016	2017
Sales	$100,000.00	$120,300.00
Cost of Goods Sold	$60,000.00	$72,180.00
Gross Margin	$40,000.00	$48,120.00
Depreciation	$16,000.00	$19,200.00
Administrative Costs	$9,000.00	$10,800.00
EBIT	$15,000.00	$18,120.00
Interest	$4,000.00	$4,000.00
Pre-tax income	$11,000.00	$14,120.00
Taxes	$4,400.00	$5,648.00
Net Income	$6,600.00	$8,472.00
Dividends	$0.00	$5,083.20
Addition to Retained Earnings	$6,600.00	$3,388.80

BALANCE SHEET AS OF 12/31/2017:

ASSETS	2016	2017
Cash	$5,000.00	$6,000.00
Inventory	$15,000.00	$18,000.00
Accounts Receivable	$15,000.00	$18,045.00
Current Assets	$35,000.00	$42,045.00
Net PPE	$80,000.00	$92,000.00
Total Assets (TA)	$115,000.00	$134,045.00

LIABILITIES & SHAREHOLDER EQUITY	2016	2017
Accounts Payable	$25,000.00	$30,000.00
Current Liabilities	$25,000.00	$30,000.00
Long Term Debt	$40,000.00	$50,656.20
Total Liabilities	$65,000.00	$80,656.20
Shareholder Equity	$50,000.00	$53,388.80
Total Liabilities and Shareholder Equity	$115,000.00	$134,045.00

What is the net cash provided from operating activities in 2017? (Refer to the Statement of Cash Flows)

Answer 1

While calculating cash from operating activities, we will start with net income and then we will add back non cash & non operating expenses into it. Here, non cash expense is depreciation and non operating expense is interest. Then, we will adjust the result for changes in current assets and current liabilities.We will add decrease in current assets (except cash) from 2016 to 2017 & deduct increase in current assets. Similarly, we will deduct decrease in current liabilities and add increase in current liabilities.

Calculation of cash from operating activities for 2017:

Net income $8472

Add: Depreciation $19200

Interest $4000

Increase in Accounts payable   $5000

Less: Increase in inventory ($3000)

Less: Increase in Accounts receivable ($3045)

Cash from operating activities $30627