Minnis Limited reported revenues of $460,000 and total expenses of $375,000.A review of the company's balance sheet and income statement also showed the following: $\begin{array}{ll}
\text { Amortization expense for the year } & \$ 37,000 \
\text { Increase in accounts receivable } & \$ 19,000 \
\text { Decrease in inventory } & \$ 30,000 \
\text { Decrease in accounts payable } & \$ 30,000\
\end{array}$ What was the cash flow from operations for Minnis?

Question

Quizplus · Accepted Answer

Cash flow from operations can be calculated by starting with net income and adjusting for non-cash expenses and changes in working capital. Net income is revenues minus expenses, which is $460,000 - $375,000 = $85,000. Add back the non-cash amortization expense of $37,000. Adjust for the increase in accounts receivable (a use of cash) by subtracting $19,000, add the decrease in inventory (a source of cash) of $30,000, and adjust for the decrease in accounts payable (a use of cash) by subtracting $30,000. The total cash flow from operations is $85,000 + $37,000 - $19,000 + $30,000 - $30,000 = $103,000.

Minnis Limited Reported Revenues of $460,000 and Total Expenses of $375,000.A