- This topic has 3 replies, 2 voices, and was last updated 10 years ago by
.
- Posts
Below are figures prepared for inclusion in the statement of cash flows of X:
1 Tax and dividends paid … 87,566
2 increase in payables …13,899
3 decrease in inventory …8,900
4 redemption of loans … 300,000
5 increase in receivables …6,555
6 reduction in cash/cash equiv … 3211
7 depreciation charge …10,600
8 payments to acquire non current assets … 47,999
9 proceeds from sales of non current assets … 13,100what is the cash generated from operations?
the answer is: 419,254
even tho the working is given in the answer i dont understand them.
what i dont understand is that the text only includes the figure for tax/dividends paid to calculate “cash generated from operating activities” and ignores items 2,3,5 and 7.
why?
You are not given the profit and so you cannot calculate the cash from operating activities the normal way.
However, you do know the reduction in the cash. And you also know that this is equally to cash from operations + cash from financing + cash from investing.
So you can work backwards 🙂
change in cash = cash from ops + cash from investment + cash from finance
-3,211=x+(-47,999+13,100)-300,000
solving for X gives: 331,668.now, i get the answer (419,254) if i add 87,566 to x.
if i am adding 87,566, then why am i not adding the remaining items? i cant get the logic of it.. 🙁
- You must be logged in to reply to this topic.