A company records a net profit of $220 for the year.Other information for the year: Depreciation expense $40
Increase in accounts receivable $60
Decrease in accounts payable $30
Cash flow from operating activities is:
A) $260.
B) $330.
C) $270.
D) $170.

Question

Quizplus · Accepted Answer

Cash flow from operating activities is calculated by adjusting net profit for non-cash expenses and changes in working capital. Starting with net profit of $220, add back depreciation of $40 (a non-cash expense), subtract the increase in accounts receivable of $60 (as it represents cash not yet received), and subtract the decrease in accounts payable of $30 (as it represents cash paid out). This results in a cash flow from operating activities of $170.

A Company Records a Net Profit of $220 for the Year.Other