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Financial Analysis: Calculating Operating Cash Flows

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Financial Analysis: Calculating Operating Cash Flows

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Questions and Answers

What is the net capital expenditure if ABC Inc.'s depreciation expense is 90 and PP&E in the balance sheet is 810 and 730 for Year 1 and Year 2 respectively?

100

70 (correct)

What is the retained earnings affected by?

Only net income and dividends (correct)

Only share capital and profit

Only operating activities and financing

Only equity and dividends

What is working capital calculated as?

Accounts payable + Inventory - Accounts receivable

Accounts receivable - Inventory - Accounts payable

Accounts receivable + Inventory + Accounts payable

Inventory + Accounts receivable - Accounts payable (correct)

In what scenario would working capital remain unchanged?

Buying inventory cash and selling cash Signup and view all the answers

What is the purpose of calculating net capital expenditure?

To determine the changes in PP&E Signup and view all the answers

What is the effect of depreciation expense on net capital expenditure?

Decreases net capital expenditure Signup and view all the answers

What is the relationship between net income and retained earnings?

Net income increases retained earnings Signup and view all the answers

What is the purpose of analyzing retained earnings?

To determine the financial health of the company Signup and view all the answers

In what scenario would working capital increase?

Buying inventory on credit and selling on cash Signup and view all the answers

What is the formula for calculating working capital?

Inventory + Accounts receivable - Accounts payable Signup and view all the answers