Question

A house painting business had revenues of $16,500 and expenses of $9,500 last summer. There were no depreciation expenses. However, the business reported the following changes in working capital:

Beginning of Year End of Year
Accounts receivable $1,700 $5,000
Accounts payable 800 350
Calculate net cash flow for the business for this period.

Answer 1

Answer: $3,250

Step-by-step explanation:

The net cash flow can be calculated by the formula:

= Operating income - Increase in Accounts receivable - decrease in accounts payable

Operating income = Revenue - expenses

= 16,500 - 9,500

= $7,000

Net cash flow = 7,000 - (5,000- 1,700) - (800 - 350)

= 7,000 - 3,300 - 450

= $3,250