Hoosier's Pizza had the following financial information for the year as follows ($ in millions):

Net income

9,200

Received loan from a local bank

4,600

Depreciation expense

1,800

Purchase equipment

5,400

Increase in accounts receivable

3,900

Pay dividends

2,200

Increase in salaries payable

1,700

Proceeds from the sale of land

3,500

Hoosier's Pizza would report net cash flow from operating activities in the amount of:

Question

Hoosier's Pizza had the following financial information for the year as follows ($ in millions):

Net income

9,200

Received loan from a local bank

4,600

Depreciation expense

1,800

Purchase equipment

5,400

Increase in accounts receivable

3,900

Pay dividends

2,200

Increase in salaries payable

1,700

Proceeds from the sale of land

3,500

Hoosier's Pizza would report net cash flow from operating activities in the amount of:

BlackTom AI · Accepted Answer

Net cash flow from operating activities equals net income adjusted for non-cash expenses and changes in working capital (current asset and current liability changes). Non-operating investing and financing cash flows (loan proceeds, equipment purchases, land sales, dividends) are excluded from operating cash flow.

Relevant knowledge points:
- Start with net income (accrual basis).
- Add back non-cash expenses (e.g., depreciation) because they reduce net income but do not use cash.
- Adjust for changes in working capital: increases in current assets (like accounts receivable) use cash → subtract; increases in current liabilities (like salaries payable) provide cash → add.
- Financing and investing items (loan received, purchase of equipment, sale of land, dividends paid) are excluded.

Step-by-step calculation with intermediate steps:
1. Net income = 9,200
2. Add depreciation (non-cash expense): 9,200 + 1,800 = 11,000
3. Subtract increase in accounts receivable (use of cash): 11,000 − 3,900 = 7,100
4. Add increase in salaries payable (source of cash): 7,100 + 1,700 = 8,800

Complete arithmetic: 9,200 + 1,800 − 3,900 + 1,700 = 8,800.

Why this is correct:
- Depreciation is non-cash so it is added back.
- An increase in accounts receivable means more sales recorded but not yet collected in cash, so it reduces cash flow.
- An increase in salaries payable means expenses recognized but not yet paid, improving current cash flow.
- The loan from the bank, equipment purchase, land sale, and dividends are investing/financing flows and do not affect operating cash flow.

Why other options are incorrect:
- $7,000 would result if one omitted the salaries payable adjustment (11,000 − 4,000 ≈ 7,000) or miscalculated working capital effects.
- $1,800 is only the depreciation amount, not operating cash flow.
- $13,200 likely double-counts investing/financing proceeds (e.g., adding loan or land sale) and is not limited to operating activities.
- $9,200 is just net income without necessary adjustments.

Conclusion: The correct net cash flow from operating activities is $8,800, which matches the provided answer.

类似问题

A firm reported sales of $350,000, interest expense of $2,330, cost of goods of $140,000, and depreciation of $17,800. The firms tax rate is 21%. How much operating cash flow did the firm generate?

Assume interest expense is equal to zero. Which one of the following calculations shows the correct method for computing the operating cash flow of a project?

Question22 A project has the following annual figures:Sales: $420,000 Cash operating costs: $360,000 Depreciation:$60,000 Tax rate: 30% What is the project's Annual Operating Cash flow (OCF) Select one alternative: $60,000 $1,800 $0 $90,000 ResetMaximum marks: 3 Flag question undefined

Question22 A project has the following annual figures:Sales: $420,000 Cash operating costs: $360,000 Depreciation:$60,000 Tax rate: 30% What is the project's Annual Operating Cash flow (OCF) Select one alternative: $1,800 $60,000 $90,000 $0 ResetMaximum marks: 3 Flag question undefined

Cash generated from a firm's normal business activities is called Blank ______.

Question at position 4 If accounts receivable increase while sales remain constant, operating cash flow will:DoubleStay the sameIncreaseDecrease

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