MGAB02H3 Lecture Notes - Lecture 11: Operating Cash Flow
10 May 2018
School
Department
Course
Professor
River Ltd Increase in current aaset
Statement of Cash Flow Dcecrease in currenrt asset
For the year ended September 30, 2017 Increase in current liablities
Decrease in current liabilities
cash flow from operating activities:
Net Income 160,000
Non Cash Items:
+ Amortization expense 64,000
- Gain on sale of equipment (6,000)
218,000
Changes in working capital (Current Assets & Liabilities)
- except for Current investment - Investing activity; Current NP - financing activity)
- Increase in interest receivable (3,000)
+ Decrease in AR 20,000
+ Decrease in inventory 10,000
- Increase in prepaid rent (800)
+ Increase in AP 5,000
+ Increase in wages payable 4,800
Cash flow from operating activites 254,000
Cash flowfrom investing activities: (Capital assets/investment)
Purchase new equipment (32,000)
Sake of old equipment 15,000
Cash flow from investing activities (17,000)
cash flow from financing activities: (LT liabilities; share capital, RE)
- Decrease in LT NP (182,000)
- Cash paid for dividend (60,000)
cash flow from financing activities: (242,000)
Total changes in cash (5,000)
Jan 1 Cash 22,000
Dec 31, Cash 17,000
Good:
- Good to have positive operating cash flow - cash sufficient to manage the day to day requirement
- Company is generating profit
- Paid cash dividend to keep the investirs interesting in the business
- Make an effort to reduce debt
- Invest in new equipment - sign of growth
Negative :
- The cash is down from last period - even though they are not overly materials, this can still be a concern
Handout Question 2: Capital Asset
Master Plumbing Ltd Opening
Statement of cash Flow + Addition
For the yeare ended December 31, 2017: - Disposal
= Ending
Cash flow from operating activities:
Net Income 36,000 Accumulated depreciation:
Non cash Items: Opening
+ Amortization expense 55,000 + Dep exp
91,000 - Dipsosal
Changes in working capital: = Ending
- Increase in AR (22,000)
+ Decrease in inventory 21,000
- Decrease in AP (49,000) Retained Earnings:
+ Increase in interest payable 5,000 Opening
- Decrease in income tax payable (4,000) + Net Income
Cash flow from operating activities 42,000 - Dividend
= Ending
Cash flow from investing activities:
Cash paid for new equipment (28,000)
Cash flow from financing activities:
Decrease in LT debt (25,000)
Issuance of CS 10,000
Payment on cash dividend (8,000)
Cash flow from financing activities: (23,000)
Total change in cash (9,000)
Jan 1 cash 80,000
Dec 31 cash 71,000
Handout Q4:
Chen Ltd Capital assets:
Statement of Cash Flow Opening
For the year ended December 31, 2017 + Addition
- Disposal
Cash flow from operating activities: = Ending
Net Income 70,000
Non Cash Items: Acc Dep
- Gain on disposal (4,000) Opening+
+ Amortization expense 49,000 + Dep exp
115,000 - Disposal
Changes in working capital: = Ending
+ Decrease in AR 5,000
- Increase in inventory (36,000) Disposal:
- Decrease in AP (11,000) Original cost
- Decrease in income tax payable (7,000) - Acc Dep
Cahs floe from operating activities 66,000 = Carry value
Sale proceeds
cash flow from investing activities: = Gain on disposal
Document Summary
For the year ended september 30, 2017 cash flow from operating activities: Changes in working capital (current assets & liabilities) Except for current investment - investing activity; current np - financing activity) 15,000 (17,000) cash flow from financing activities: (lt liabilities; share capital, re) Cash paid for dividend cash flow from financing activities: (182,000) (60,000) (242,000) Good to have positive operating cash flow - cash sufficient to manage the day to day requirement. Paid cash dividend to keep the investirs interesting in the business. Invest in new equipment - sign of growth. The cash is down from last period - even though they are not overly materials, this can still be a concern. Cahs floe from operating activities cash flow from investing activities: + sale of equipment cash flow from investing activities: $ 390,000 + $ 160,000 - $ 490,000 rn.
