“Walk me through the cash flow statement.”
"Walk me through the cash flow statement." This is the natural next step after the income statement and balance sheet — and the strongest answers reconcile Net Income to an actual cash balance with real numbers. Use the figures below for Atlas Manufacturing Inc. — continuing from Case 1 and Case 2 — to build out its cash flow statement for the same fiscal year.
Task: explain how the cash flow statement reconciles Net Income to an actual cash balance across its three sections, then demonstrate that using the figures for Atlas Manufacturing Inc. below.
The following figures are reported for the same fiscal year as Cases 1 and 2.
| Line Item | Amount |
|---|---|
| Net Income | $52.5m |
| Depreciation & Amortization (D&A) | $30.0m |
| Increase in Accounts Receivable | $15.0m |
| Increase in Inventory | $10.0m |
| Increase in Accounts Payable | $8.0m |
| Capital Expenditures (CapEx) | $45.0m |
| Debt Repayment | $12.0m |
| Dividends Paid | $5.0m |
| Beginning Cash Balance | $76.5m |
CFO = Net Income + D&A − Increase in Accounts Receivable − Increase in Inventory + Increase in Accounts Payable
Using this formula, compute CFO.
CFI = −Capital Expenditures (CapEx)
Using this formula, compute CFI.
CFF = −Debt Repayment − Dividends Paid
Using this formula, compute CFF.
Ending Cash Balance = Beginning Cash Balance + CFO + CFI + CFF
Using this formula, compute the Net Change in Cash and the Ending Cash Balance — and check it against the Cash line on the balance sheet from Case 2.
Try answering out loud first — then reveal the model answer and compare.
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