Sunshine Limited had a profit after tax of $55,000 for the financial year. Included in this profit was a depreciation expense of $7,000 and a gain on sale of investments of $1,500. Accounts receivable increased by $2,800; inventories increased by $900 and accounts payable increased by $6,300. The cash flow from operating activities amounted to:

Question

Quizplus · Accepted Answer

To calculate the cash flow from operating activities, start with the profit after tax and adjust for non-cash items and changes in working capital. The calculation is as follows: Profit after tax = $55,000 Add back non-cash expense (depreciation) = $7,000 Deduct non-operating income (gain on sale of investments) = -$1,500 Adjust for increase in accounts receivable = -$2,800 Adjust for increase in inventories = -$900 Add back increase in accounts payable = $6,300 Therefore, the cash flow from operating activities = $55,000 + $7,000 - $1,500 - $2,800 - $900 + $6,300 = $63,100.

Sunshine Limited Had a Profit After Tax of $55,000 for the Financial