Ramakrishnan Inc. reported 2018 net income of $20 million and depreciation of $1,500,000. The top part of Ramakrishnan, Inc.'s 2017 and 2018 balance sheets is listed as follows (in millions of dollars).
$$\begin{array}{l}
\begin{array} { l l l l l l }
\text {assets}&2017&2017&\text {liabilities\&equity}&2017&2018\
\text {currnt assets}&&&\text {current liabilities accured}&&\
\text {cash and marketable securities}&\$15&\$20&\text {wages and taxes}&\$18&\$20\
\text {accounts reciveable}&75&84&\text {accounts payable}&45&50\
\text {inventory}&110&121&\text {notes payable}&40&45\
\text {total}&\$200&\$225&\text {total}&\$103&\$115\
\end{array}
\end{array}$$
Calculate the 2018 net cash flow from operating activities for Ramakrishnan, Inc.

Question

Ramakrishnan Inc. reported 2018 net income of $20 million and depreciation of $1,500,000. The top part of Ramakrishnan, Inc.'s 2017 and 2018 balance sheets is listed as follows (in millions of dollars).
$$\begin{array}{l}
\begin{array} { l l l l l l  } 
\text {assets}&2017&2017&\text {liabilities\&equity}&2017&2018\
\text {currnt assets}&&&\text {current liabilities accured}&&\
\text {cash and marketable securities}&\$15&\$20&\text {wages and taxes}&\$18&\$20\
\text {accounts reciveable}&75&84&\text {accounts payable}&45&50\
\text {inventory}&110&121&\text {notes payable}&40&45\
\text {total}&\$200&\$225&\text {total}&\$103&\$115\
\end{array}
\end{array}$$
Calculate the 2018 net cash flow from operating activities for Ramakrishnan, Inc.

Quizplus · Accepted Answer

Net cash flow from operating activities can be calculated by starting with the net income and adjusting for non-cash expenses and changes in working capital. Here, the net income for 2018 is $20 million, and depreciation (a non-cash expense) is $1.5 million. Changes in working capital involve changes in current assets and current liabilities (excluding cash and cash equivalents, and debt). - Increase in accounts receivable: $84 million - $75 million = -$9 million (use of cash)- Increase in inventory: $121 million - $110 million = -$11 million (use of cash)- Increase in accounts payable: $50 million - $45 million = $5 million (source of cash)- Increase in wages and taxes payable: $20 million - $18 million = $2 million (source of cash)Net change in working capital = -$9 million - $11 million + $5 million + $2 million = -$13 millionTherefore, the net cash flow from operating activities = $20 million + $1.5 million - $13 million = $8.5 million.

Ramakrishnan Inc Calculate the 2018 Net Cash Flow from Operating Activities for Depreciation