Question

Arlington Inc.'s income statement showed Net Income of $57,600 and Depreciation Expense of $9,200 Accounts Receivable increased $3,750, Inventory increased $3,200, Supplies decreased $500, Accounts Payable increased $2,700 and Accrued Liabilities decreased $1,900. Arlington's net cash flow provided by operations totaled $_____.

Answer 1

Arlington Inc.'s net cash flow provided by operations totaled $65,850.

Step-by-step explanation:

Arlington Inc.'s net cash flow provided by operations is calculated using the indirect method, starting with the net income and adjusting for changes in non-cash items and working capital. Net income, which is $57,600, serves as the starting point. To this, we add back the depreciation expense, which is a non-cash item, yielding a subtotal of $66,800. Next, we consider changes in working capital.

Accounts Receivable increased by $3,750, Inventory increased by $3,200, Supplies decreased by $500, Accounts Payable increased by $2,700, and Accrued Liabilities decreased by $1,900. The net effect of these changes in working capital is an adjustment of $6,350 ([$3,750 + $3,200 - $500] - [$2,700 + $1,900]). Adding this adjustment to the subtotal, we get $73,150. Finally, we account for changes in non-cash items, which include the depreciation expense previously added back. Subtracting the depreciation expense of $9,200 results in a net cash flow provided by operations of $65,850.

In summary, the net cash flow provided by operations is $65,850. This figure reflects Arlington Inc.'s operational liquidity, considering not only the net income but also adjustments for non-cash items and changes in working capital. The analysis provides a comprehensive view of the company's ability to generate cash from its core business activities.