Net loss ($16,000) 2.What were the major reasons that this company was able to r

Question

Net loss

($16,000)

2.What were the major reasons that this company was able to report a net loss but positive cash flow from operations?

3.Of the potential causes of differences between cash flow from operations and net income, which are the most important to investors?

The following income statement and information about changes in noncash current assets and current liabilities are reported. Arundel Company Income Statement For the year ended December 31, 20XX Revenues $100,000 Operating expenses      Salaries expense $84,000      Utilities expense 14,000      Depreciation expense
14,000      Other expenses 3,400 Total operating expenses
116,000

Net loss

($16,000)

Explanation / Answer

Company has reported Net loss of $16000 but operating cash flow is -$2000 which is due to Non cash expense(Depreciation) which charged to Income Statement but added back in Operating Cash flow.

The Operating cash flow can be positive if we assume other expense $3400 as non operating expense. in this case Cash flow will be positive $1400.

Most Important point to investor is Depreciation expense which has made difference in operating cash flow and Net Income.

Cash flow Statement Net Profit /(Loss) -$16,000.00 Add: Depreciation $14,000.00 Cash flow from Operation -$2,000.00

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