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For 2018, NewCo had PAT of $10 million and depreciation and amortization of $9 million. If...

  1. For 2018, NewCo had PAT of $10 million and depreciation and amortization of $9 million. If accounts receivable increased $6 million, accounts payable increased $3 million and inventory increased $4 million during 2018, what was NewCo’s Cash from Operating Activities?
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Answer #1

For calculating cash from operating activities, we need to add back non cash expense of depreciation and amortization in PAT and then deduct increase in current assets and add current liabilities.Here, current assets are accounts receivable and inventory, and current liabilities are accounts payable.

So, cash from operating activities is (in millions):

PAT $10

Add: Depreciation $9

Add: Increase in accounts payable $3

Less: Increase in accounts receivable ($6)

Less: Increase in inventories ($4)

Cash from operating activities $12

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