Question

What is the change in cash for a firm with the following: $10,000 cash flow from operations, $1,600 cash used for new investment, a reduction in the level of debt of $2,000, $1,000 in cash dividends, and $200 in depreciation expense

Answer 1

Answer:

The change in cash balance is $5,400.

Explanation:

Statement of Cash Flows summarizes use of cash in three main activities namely operating activities, investing activities, and financing activities.

The change in the cash balance can be calculated based on the net of cash inflows and outflows.

Depreciation expense is a non-cash item, therefore, it should not be included in the calculation.

Activity                         Cash Inflow/ (Outflow)

Cash from Operations $10,000

New investment         ($1,600)

Repayment of debt ($2,000)

Cash dividends         ($1,000)

Net Cash Flow          $5,400