Series 79 practice questionmediumCash Flow Analysis
A company has net income of $40 million, depreciation of $10 million, and an increase in accounts receivable of $5 million year-over-year. What is the cash provided by operating activities, assuming all other items remain unchanged?
- A$55 million
- B$45 million✓ Correct answer
- C$35 million
- D$65 million
Explanation
Why B — $45 million
Cash flow from operations = Net income + depreciation - increase in accounts receivable = $40m + $10m - $5m = $45m. $55m ignores AR, $35m omits depreciation.
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