Cash flow statement - cash from operations

Question 1

Cash from operations structure

Answer 1

Net income
+D&A
-Increases in A/R, inventory, prepaid expenses, other current assets
+increases in A/P, accrued expenses, taxes payable and other current liabilities
+/- any other changes

Question 2

Net income

Answer 2

Starting point of cash flow statement when using indirect method

Question 3

D&A

Answer 3

Usually the second line in a CFS is the add back of noncash D&A expense, which is embedded in COGS and operating expenses on the I/S thus reducing net income

Question 4

Increases in A/R, inventory, prepaid expenses, other current assets

Answer 4

• Increases in working capital asset balances during the period should be reflected as cash outflows
• Decreases in working capital asset balances during the period should be reflected as cash inflows

Question 5

Increases in A/P, accrued expenses, taxes payable and other current liabilities

Answer 5

• Increases in working capital liability balances during the period should be reflected as cash inflows
• Decreases in working capital liability balances during the period should be reflected as cash outflows

Question 6

Any other changes

Answer 6

\+ Impairments
- Gains on sale of assets
\+ Stock based compensation
- Increases in deferred tax assets
\+ Increases in deferred tax liabilities