Question

The company had a net income of $248,462, and depreciation expenses were equal to $72,487. What is the firm's cash flow from financing activities?

Answer 1

The question about cash flow from financing activities is unrelated to net income and depreciation. Instead, accounting profit can be calculated by subtracting all expenses from sales revenue, which for the provided case is $50,000, derived from $1 million sales revenue minus $950,000 total expenses.

Step-by-step explanation:

The framing of the student's question about the firm's cash flow from financing activities based on net income and depreciation expenses is slightly off because cash flow from financing activities (CFF) is actually independent of net income and depreciation. Instead, the CFF is derived from the inflow and outflow of funds resulting from debt issuance, equity financing, and dividends paid to shareholders. However, I'll provide information on how to calculate accounting profit using given sales revenue and expenses, which is a topic more directly related to the provided data.

To calculate a firm's accounting profit, you should subtract all expenses from the total sales revenue. Given the sales revenue of $1 million and expenses (labor being $600,000, capital $150,000, and materials $200,000), the calculation would be as follows:

Sales revenue - Labor expense - Capital expense - Materials expense

= $1,000,000 - $600,000 - $150,000 - $200,000

= $50,000

Therefore, the firm's accounting profit is $50,000.

Answer 2

Complete Question:

The complete question can be seen the in the attachment at the end of the solution of the question.

Answer:

Option B. -$182,057

Step-by-step explanation:

The Cash flow from financing activities can be calculated by using the following formula:

Cash flow from financing activities = Changes in the equity finance

+ Changes in long term borrowings + Changes in short term borrowings

- Interest paid - Dividends paid

Here

Changes in the equity = $175,000 common stock in year 2008

- $125,000 common stock in year 2008 = $50,000

Changes in long term Borrowings = $61,290 - $78,445 = - $17,155

Changes in short term Borrowings = $16,753 - $12,004 = $4749

Interest paid is $0 because interest rate is not given hence we can't calculate it.

Dividends paid = $190,568 Opening Retained Earnings + $248,462 Net Profit for the year - $219,379 Closing Retained Earnings = $219,651

Now, by putting values in the above equations, we have:

Cash flow from financing activities = $50,000 - $17,155 + $4749 - 0 - $219,651 = -$182,057