A firm has a net income of 150, an increase in accounts receivables of 30, depreciation of 55 and a decrease in accounts payable of 25. Its operating cash flow is
________.
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A. B. C. D.B
operating cash flow = net income + noncash expenses - non-cash revenues = 150 + 55 - 30 - 25 = 150.
To calculate the operating cash flow, we need to consider the components that affect the cash flow from operations. These components include net income, non-cash expenses (such as depreciation), and changes in working capital.
Given information: Net income = 150 Increase in accounts receivable = 30 Depreciation = 55 Decrease in accounts payable = 25
The formula to calculate operating cash flow is as follows:
Operating Cash Flow = Net Income + Non-cash Expenses - Changes in Working Capital
Let's break down the calculation step by step:
Start with net income: Operating Cash Flow = 150
Add non-cash expenses (depreciation): Operating Cash Flow = 150 + 55
Consider changes in working capital. Working capital is the difference between current assets and current liabilities. Changes in working capital occur when there are changes in accounts receivable and accounts payable.
The increase in accounts receivable means the company has received less cash from its customers compared to the previous period. Therefore, it is a use of cash and needs to be deducted: Operating Cash Flow = 150 + 55 - 30
The decrease in accounts payable means the company has paid more cash to its suppliers compared to the previous period. Therefore, it is a use of cash and needs to be deducted as well: Operating Cash Flow = 150 + 55 - 30 - (-25)
Simplifying the equation: Operating Cash Flow = 150 + 55 - 30 + 25
Operating Cash Flow = 200
Therefore, the correct answer is A. 200.
The operating cash flow for the firm is 200.