Question

During February of a certain year, the Bacharat Hotel purchases inventory for $12,000. The hotel also bought a kitchen stove for $3,750 and sold stocks for $50,000 in February.Since this hotel was recently established (beginning of February), it did not yet admit guests. If everything else remains unchanged, the cashflow from operating activities would be equal to:

Answer 1

The cash outflow from operating activities for the Bacharat Hotel in February, without any revenue, would be $15,750, which is the sum of the inventory and kitchen stove purchases.

Step-by-step explanation:

The cash flow from operating activities for the Bacharat Hotel in February of a certain year, considering it made no revenue as it did not admit guests, can be determined by looking solely at the outflow for operational expenses.

In this scenario, the hotel purchased inventory for $12,000 and also acquired a kitchen stove for $3,750. While the hotel also sold stocks for $50,000, the sale of stocks is considered an investing activity and not an operating activity.

Therefore, if there were no other cash inflows or outflows related to operating activities, the cash flow from operating activities would be the sum of cash spent on the inventory and the kitchen stove, which equates to:

Cash flow from operating activities = Inventory purchase + Kitchen stove purchase

Cash flow from operating activities = $12,000 + $3,750 = $15,750

The cash outflow from operating activities for February would thus be $15,750.