Question

Random Corporation has net income of $60,000 after subtracting depreciation of $5,000 and all other expenses. Current assets increased by $4,000, and current liabilities decreased by $7,000. Using an indirect method, how much is the cash flow from operating activities?

Answer 1

Answer:

$54,000

Explanation:

The cash flow statement shows the net cash use or generated from the various activities of the company. These activities are classed as operating, investing and financing. The Indirect cashflow shows the operating, investing and financing activities in that order.

Depreciation is a non cash item and will be added back to the net income. Increase in asset  and a decrease in liabilities are outflow of cash (hence negative in cash flow).

The cash flow from operating activities

= $60,000 + $5,000 - $4,000 - $7,000

= $54,000