A firm has net total sales of 16,000 and administrative cash expense of 4,500. It paid taxes in the amount of 2,300 and had an increase in accounts payable of
400. The depreciation expense was estimated at 1,200. Then, the firm's operating cash flow was ________.
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A. B. C. D.A
The increase in accounts payable implies that some of the operating expenses were on credit and did not cause a cash outflow. Therefore, this increase must be added to the net sales. Further, depreciation should be ignored since it is a non-cash expense and its effect on taxes is already impounded in the taxes of 2,300.
Hence, the total operating cash flow = 16,000 + 400 - 4,500 - 2,300 = 9,600