Question

Excel Technology is considering seller-finance for an existing customer with the following information. The net income...

Excel Technology is considering seller-finance for an existing customer with the following information. The net income is $120MM. The depreciation cost is $10MM. What is the subject firm's cash flow from operations (CFO)? Show your calculations    (9 points)

Decrease in accounts receivable

$30 MM

Issuance of new stocks

17

Proceeds from the sale of fixed assets

5

Increase in inventory

17

Increase in accounts payable

15

Dividends paid out

35

Decrease in wages payable

15
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Answer #1

Cash flow from operation is $ 143 MM.

Cash Flow from operation is calculated as follows:
(MM)
Net Income 120
Depreciation 10
Decrease in accounts receivable 30
Increase in inventory -17
Increase in accounts payable 15
Decrease in Wages payable -15
Net Cash generated from operating activities 143
Note:
Issuance of new stock is a financing activity.
Sale of fixed asset is an investing activity.
Dividend paid out is a financing activity.
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