Computing Cash Flow Using Indirect Methods
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1. Compute cash provided by operating activities using the indirect method.
Martinez, Inc. reported net income of $2.5 million in 2007. Depreciation for the year was $160,000, accounts receivable decreased $350,000, and accounts payable decreased $280,000. Compute net cash provided by operating activities using the indirect approach.
2. Compute cash provided by operating activities using the indirect method.
The net income for Adcock Co. for 2007 was $280,000. For 2007 depreciation on plant assets was $70,000, and the company incurred a loss on sale of plant assets of $12,000. Compute net cash provided by operating activities under the indirect method.
3. Compute net cash provided by operating activities using the indirect method.
The comparative balance sheets for Goltra Company show these changes in noncash current asset accounts:
Accounts receivable decrease $80,000, prepaid expenses increase $28,000, and inventories increase $30,000. Compute net cash provided by operating activities using the indirect method assuming that net income is $200,000.
4. Calculate and analyze free cash flow.
The management of Radar Inc. is trying to decide whether it can increase its dividend. During the current year it reported net income of $875,000. It had cash provided by operating activities of $734000, paid cash dividends of $70,000, and had capital expenditures of $280,000. Compute the company's free cash flow, and discuss whether an increase in the dividend appears warranted. What other factors should be considered?
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This solution calculates the cash flow provided by operating activities for various companies.
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