Lani's generated net income of $911, depreciation expense was $47, and dividends paid were $25. Accounts payables increased by $15, accounts receivables increased by $28, inventory decreased by $14, and net fixed assets decreased by $8. There was no interest expense. What was the net cash flow from operating activity?
A) $776
B) $865
C) $959
D) $922
E) $985

Question

Quizplus · Accepted Answer

To calculate the net cash flow from operating activity, start with the net income and adjust for non-cash expenses and changes in working capital. Here, start with net income of $911, add back depreciation (a non-cash expense) of $47, and adjust for changes in working capital: increase in accounts payable (+$15), increase in accounts receivable (-$28), decrease in inventory (+$14), and decrease in net fixed assets (-$8, but this is not a working capital change and thus not included in operating activities). The calculation is $911 + $47 + $15 - $28 + $14 = $959.

Lani's Generated Net Income of $911, Depreciation Expense Was $47