Question

KMART Corporation had net camings of $2,876 million in the fiscal year ending January 31, 2010. Additional information follows (in millions): Year Ended January 31, 2011 Depreciation and amortization Bad debt expense Non-cash losses Other noncash charges affecting earnings $2,185 $ 154 $ 40 $100 Cost of sales - $47,855 Deferred income taxes $ 389 Changes in noncash wor accounts: Accounts receivable $ 155 Increase Inventory S 365 Decrease Other assets $ 115 Increase Accrued liabilities $ 221 Increase Accounts payable Decrease Other liabilities Decrease 1. Compute the net cash provided by operating activities. Explain why the net cash provided by operating activities is greater than the net income. (Note that both the bad debt expense and deferred Income taxes are noncash expenses.) $ 245 89

Answer 1

Answer:

KMART Corporation
Cash flow statement (partial)
For the year ended January 31,2010
Cash flows from operating activities:
Net income		$2,876
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization	$2,185
Bad debt expense	$154
Non-cash losses	$40
Other non-cash charges	$100
Deferred income taxes	$389
Changes in non-cash working capital accounts:
Increase in Accounts receivable	($155)
Decrease in inventory	$365
Increase in other assets	($115)
Increase in accrued liabilities	$221
Decrease in accounts payable	($245)
Decrease in other liabilities	($89)	$2,850
Net cash provided by operating activities		$5,726

Net income is the profit a company has earned for a period, while cash flow from operating activities measures, in part, the cash going in and out during a company's day-to-day operations. So that net income is different from net cash provided by operating activities.