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7-Xylon_Case Solution - Add back non-cash charges to income...

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Solution to Xylon Company Question 1 Cash Flows from Operating Activities Net income 8 Add: Depreciation 12 Add: Loss on disposal 2 Subtract: Increase in Accounts receivable (20) Subtract: Increase in Inventory (25) Subtract: Increase in Prepaid insurance ( 1) Add: Increase in Accounts payable 14 Cash used in operating activities (10) Cash Flows from Investing Activities Acquisition of building (60) Proceeds from disposal of fixed assets 10 Cash used in inventing activities (50) Cash Flows from Financing Activities Increase in long-term debt 40 Dividends paid ( 4) Cash provided by financing activities 36 Change in cash during the period (24) Question 2: Xylon is using cash in operating activities because of large increases in accounts receivable and inventories. It is also using more cash in investing activities than it is providing through financing activities.
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Unformatted text preview: Add back non-cash charges to income such as depreciation and amortization. Subtract gains and add losses on disposal. Subtract increases (or add decreases) in assets that relate to operating items on the income statement. Add increases (or subtract decreases) in liabilities that relate to operating items on the income statement. Subtract cash used to make acquisitions of new investments in PP&E and other assets. Add cash proceeds received from disposal of old investments. Add cash obtained from increases in long-term debt and other borrowings. Also add increases in contributed capital resulting from sale of shares. Subtract cash used to reduce long-term debt and other borrowings. Also subtract cash used to repurchase shares or pay dividends....
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