Question

Using the following transactions under U.S. GAAP, answer the question below: (Signs intentionally omitted) What is Cash Flow from Operating activities (\$CFO)? \( \$ 160 \) \( \$ 170 \) \( \$ 100 \) \

Answer 1

The Cash Flow from Operating activities ($CFO) can be calculated using the indirect method, which involves adjusting the net income for non-cash expenses and changes in working capital.

Step-by-step explanation:

The Cash Flow from Operating activities ($CFO) can be calculated using the indirect method. In this method, the Net Income is adjusted for non-cash expenses, changes in working capital, and non-operating activities to determine the cash generated from the company's primary operations.

1. Start with the net income, which is not provided in the question, but it is a crucial component in calculating the cash flow from operating activities.
2. Add back non-cash expenses such as depreciation and amortization.
3. Adjust for changes in working capital, which include changes in accounts receivable, accounts payable, and inventory.
4. Exclude non-operating activities such as interest income, interest expense, and gains/losses on the sale of assets.

Using the given transactions, we need additional information, like net income and non-cash expenses, to calculate the cash flow from operating activities ($CFO).