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A firm has sales of $100,000, costs of $60,000, a depreciation expense of $10,000, and no...

A firm has sales of $100,000, costs of $60,000, a depreciation expense of $10,000, and no interest expense. The firm's assets have remained constant, but their current assets have increased by $10,000. Their current liabilities have also increased by $10,000. The firm's tax rate is 20%.

What is the net cash flow from assets of the firm?

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Answer #1

Cash flows from operations :-

Particulars Amount
Sales 100,000
Less- cost 60,000
Depreciation 10,000
Profit before taxes 30,000
Less- tax@ 20% 6000
Profit after taxes 24,000
Add- depreciation 10,000
Cash flows from operations 34,000

Changes in working capital = increase in current assets - increase in current Liabilities = 10000 - 10000 = 0

Net cash flows from assets= cash flows from operations +/- changes in wc = $ 34,000 - 0 $ 34,000

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