Explanation Memo From XYZ To RJ, Company E. April 2, 2018 Sub: Operating activities. The financial statement of Company E shows the net income of $5 million. But the net income alone could not be the determinant for the declaration of dividends. Net income is the excess amount of revenuewhich arises after deducting all the expenses of a company. In simple terms, it is the difference between total revenue and total expenses of the company. However the operating activities provide the information about the flow of funds from the business operations. Operating activities refer to the normal activities of a company to carry out the business. And the net cash flow from operating activities is negative for the Company E. As per the GAAP guidelines the net cash flow from operating activities, could be computed either using the direct or the indirect methods as shown below. Cash Flows from Operating activities using Direct Method: Amount in Millions Particulars Amount ($) Amount ($) Cash flows from Operating activities: Cash Inflows: From customers (1) $55 Cash Outflows: To suppliers of goods (2) ($43) For remaining expenses (3) ($28) Net cash flows from operating activities ($16)

GEN COMBO INTERMEDIATE ACCOUNTING; CONNECT ACCESS CARD

9th Edition

ISBN: 9781260089035

Author: J. David Spiceland

Publisher: McGraw-Hill Education

See similar textbooks

Question

Chapter 21, Problem 21.1BYP

To determine

To Prepare: A memo.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Chapter 21, Problem 21.21P

Chapter 21, Problem 21.2BYP

Students have asked these similar questions

On January 1, 20X2, Mace, which uses the straight-line method, purchases a machine for $72,000 that it expects to last for 8 years; Mace expects the machine to have a residual value of $10,000. What is the machine's book value at the end of 20X4? i. $48,750 ii. $42,010 iii. $35,550 iv. $50,400

can you please solve this questions

XUV Industries manufactures premium-quality glassware. The standard materials cost is 3 pounds of raw glass at $2.00 per pound. During October, 15,000 pounds of raw glass costing $2.10 per pound were used to produce 6,000 glassware items. Determine the materials price variance and materials quantity variance.help

Chapter 21 Solutions

GEN COMBO INTERMEDIATE ACCOUNTING; CONNECT ACCESS CARD

Ch. 21 - Effects of all cash flows affect the balances of...Ch. 21 - Prob. 21.2Q Ch. 21 - Prob. 21.3Q Ch. 21 - Prob. 21.4Q Ch. 21 - Prob. 21.5Q Ch. 21 - Prob. 21.6Q Ch. 21 - Prob. 21.7Q Ch. 21 - The sale of stock and the sale of bonds are...Ch. 21 - Does the statement of cash flows report only...Ch. 21 - Prob. 21.10Q

Knowledge Booster

A memo.

Solution Summary: The author explains that the financial statement of Company E shows the net income of 5 million. However, the operating activities provide information about the flow of funds from the business operations.

To Prepare: A memo.

Want to see the full answer?

Chapter 21 Solutions