Q1. A firm generated net income of $106327. The depreciation expense was $40,000

Question

Q1. A firm generated net income of $106327. The depreciation expense was $40,000 and dividends were paid in the amount of $33,000. Accounts payables decreased by $13,000, accounts receivables increased by $25,000, inventory decreased by $30,000, and net fixed assets decreased by $80,000. There was no interest expense. What was the net cash flow from operating activity?

Q2A firm has sales of $200,190, net income of $174,000, net fixed assets of $106327, and current assets of $42,000. The firm has $31,000 in inventory. What is the common-size statement value of inventory?

Explanation / Answer

1) Net Cash Flows from operating activity = Net Income + Depreciation - Increase in working capital

= 106,327 + 40,000 - (13,000 + 25,000 - 30,000)

= 138,327

2) Value of inventory on common size statement = Inventory / Total Assets

= 31,000 / (106,327 + 42,000) = 20.9%

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