Question

The balance sheet of Innovative Products reports total assets of $570,000 and $770,000 at the beginning and end of the year, respectively. The cash return on assets for the year is 30%. Calculate Innovative Products’ net cash flows from operating activities (operating cash flows) for the year.

Answer 1

Answer:

$201,000

Explanation:

The computation of net cash flows from operating activities is shown below:-

Beginning Total Assets            $570,000

Ending total assets                   $770,000

Average Total Assets in use    $670,000

($570,000 + $770,000) ÷ 2

Cash return on Asset                    30%

Cash Flow from operating activities  

Average Assets × 25%               $201,000

($670,000 × 25%)

Therefore the Cash Flow from operating activities is $201,000