if manufacturing expenses are 20000, interest expenses rs 4000, cash sales is rs 30000. increase in inventory and debtors is Rs 5000 and Rs 7000 respectively. While increase in accounts payable is 9000. Calculate the cash flow from operations?
Answers
Rs. 84,000.
Cash flow from operating activities (CFO) is a term of accounts which shows the amount of money that a company accumulates from an ongoing regular business activity like manufacturing, providing a service or selling goods.
Cash flow from operating activities (CFO) does not include investment costs or long-term capital expenditures as they are essentially one-time activities.
CFO is more directed towards the core business and it is also called as net cash from operating activities or operating cash flow (OCF) in general terms.
The cash flow from operations is $3,000
Explanation:
Operating activities: it involves those transactions that after net income impact the working capital. It would subtract the rise in current assets and a reduction in current liabilities, while adding the decline in current assets and an increase in current liabilities.
These changes would be adjusted in working capital. In addition, depreciation costs are applied to net income and losses on the sale of assets are added, while profits on the sale of assets are excluded
The computation of the cash flow from operations is shown below:
Cash flow from operations
Net income $6,000
Less: Increase in inventory -$5,000
Less: Increase in debtors -$7,000
Add: Increase in accounts payable $9,000
Cash flow from operations $3,000
The net income is computed below:
= Cash sales - manufacturing expenses - interest expenses
= $30,000 - $20,000 - $4,000
= $6,000
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