Which of the following is NOT involved in calculating the operating cash flow from net income from operations?

C

Gain from retirement of debt is an extraordinary item under GAAP and is not a part of operating cash flow. Indeed, the gain is a non-cash item.

In order to calculate the operating cash flow from net income from operations, we need to make adjustments for non-cash items and changes in working capital. The operating cash flow is a measure of the cash generated or used by a company's core operations.

Let's go through each option to determine which one is NOT involved in calculating the operating cash flow from net income from operations:

A. Increase in current assets in the form of receivables.

• When receivables increase, it means that the company is selling goods or services on credit and has yet to receive the cash from customers. This represents an increase in working capital, specifically in current assets. Therefore, an increase in receivables is involved in calculating operating cash flow. This option is NOT the correct answer.

B. Increase in current liabilities in the form of payables.

• An increase in payables represents an increase in the amount owed by the company to suppliers or vendors for goods or services received on credit. It is considered a source of cash because the company has not yet made the cash payment for those goods or services. Thus, an increase in payables is involved in calculating operating cash flow. This option is NOT the correct answer.

C. Gain from retirement of debt.

• A gain from the retirement of debt is a non-operating item and is not related to the core operations of the business. It represents a one-time gain realized from paying off debt at a discount or below the recorded carrying value. Since the operating cash flow focuses on cash generated or used by operating activities, gains from debt retirement are excluded from the calculation. This option is the correct answer.

D. None of these answers.

• This option suggests that none of the previous options is correct. However, as explained above, option C (Gain from retirement of debt) is the correct answer as it is not involved in calculating the operating cash flow from net income from operations.

To summarize, the correct answer is C. Gain from retirement of debt. This item is not involved in calculating the operating cash flow from net income from operations as it represents a non-operating item.