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Please help with this question.
The figures below have been prepared for inclusion in the statement of cash flows of Bamboo.
Tax and dividends paid 87,566
increase in payables 13,899
decrease in inventory 8900
redemption of loans 300000
increase in recievables 6555
reduction in cash and cash equivelents 3211
depreciation charge 10600
payments to acquire non-current assets 47999
proceed from sale of non current assets 13100what is the cash generated from operations ?
A) $331,688
B) $338,110
C) $425,676
D) $419,254What help do you need? (because although I will help with any problems, I am not going to simply do the question for you!)
Have you watched our free lectures on Statements of cash flows?
Kindly tell me what figures will I have to include in cash generated from operations? some are obvious like 1. increase in payables 2. decrease in inventory 3. increase in receivables 4. reduction in cash and cash equivalents 5. depreciation charge etc but i m not sure but redemption of loans. kindly guide me with technique of this question.
thanksI ask again – have you watched our free lectures on Statements of cash flows? I cannot type out the whole lecture here!
The movement in cash and cash equivalents does not appear as part of cash generated from operations.
Repayment of loans appears under cash flows from financing activities.This is a ‘work-backwards’ question in that you know what the end figure is (the movement in cash and cash equivalents), you know what the cash flows from financing activities is (the repayments of the loans), and you know what the cash flows from investing activities are (the purchase and sale of the non-current assets), and so you can work backwards to calculate what the cash flows from operating activities is.
Hi John.
I know this is an old topic but I did not want to start another one for the same problem.
The question is taken from Kaplan exam kit and the answer is states as:Cash generated from operations (?) 419,254
Tax and dividends paid (87,566)
_______
Net cash from operating activities (?) 331,688
Purchase of property, plant and equipment (47,999)
Proceeds from sale of property, plant and equipment 13,100
_______
Net cash from investing activities (34,899)
Redemption of loans (300,000)
_______
Net cash from financing activities (300,000)
_______
Decrease in cash and cash equivalents (3,211)What I don’t understand here is why are increase in payables,
decrease in inventory and increase in recievables not being considered.
They are all used in calculating cash generates from operations right?I would appreciate you help!
They are used in calculating the cash generated from operation when we are given the profit.
This question is working backwards in order to calculate the cash generated from operations. The changes in payables etc would only be relevant if the question wanted you to carry on working backwards and calculate what the profit was.
Have you watched my free lectures on statements of cash flows?
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