Given the following selected information on McMillen's Chocolate, Inc., calculate Cash Flow from Operating Activities for 2012. Show your work. 2011 2012
EAT $ 600,000 800,000
Depreciation Exp. 100,000 120,000
Dividends 400,000 550,000
Accounts Receivable 1,500,000 1,000,000
Inventory 3,500,000 4,100,000
Accts. Payable 350,000 350,000
Accruals 250,000 200,000
Long-Term Debt 2,300,000 2,000,000
Common Stock 2,200,000 3,000,000
Interest expenses 50,000 60,000
Retained Earnings 6,150,000 6,400,000

Cash flow from operating activities for the Year 2012 = $770000.

Explanation:

Particulars                                                                    Amount ($)

Earnings after tax (EAT)                                               800,000

+ Depreciation (Non-cash expenditure)                      120,000  

Operating profit before working                                  920,000

capital changes

+ Decrease in accounts receivable                             500,000

(1,500,000 - 1,000,000)  

- increase in inventory                                                  600,000

(4,100,000 - 3,500,000)

- Decrease in accrual                                                     50,000

(250,000 - 200,000)  

Cash flow from operating activities                            770,000

Conclusion:- Cash flow from operating activities for the Year 2012 = $770000.

both are integral parts of a corporate balance sheet. the cash flow statement, or statement of cash flows, measures the sources of a company's cash and its uses of cash over a specific time period. the income statement measures a company's financial performance, such as revenues, expenses, profits or losses over a specific time period (in fact, it's sometimes called a statement of financial performance).

a cash flow statement shows exactly how much money a company has received and how much it has spent, traditionally over a period of one month. it captures the current operating results and changes on the balance sheet, such as increases or decreases in accounts receivable or accounts payable, and does not include noncash accounting items such as depreciation and amortization. the cash flow generally comes from revenue received as a result of business activity, but it may be augmented by funds available as a result of credit. a cash flow statement is used to determine the short-term viability and liquidity of a company, specifically how well it is positioned to pay its bills and vendors.

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