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Question 4 6 pts For each cash flow item, identify the required adjustment to get after-tax cash flows: Investment cash outfl
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Answer #1

Investment cash outflow: These include purchase of any fixed asset or investment like purchase of land, buildings, bonds, etc. It must be deducted from the operating income.

Expense cash out flow: It includes payment towards any revenue expenditure or operating expense like salaries, rent, utilities, inventory, etc. It must be deducted from the operating income.

Working capital cash inflow: It is the excess of current asset over current liabilities. In the cash flow statement indirect method, increase in asset is deducted and increase in liabilities is added. Working capital cash inflow indicates increase in net asset. Thus it should be deducted from the operating income.

Revenue cash inflow: It includes cash receipts from sales like cash sales, collection from debtors, etc. It must be added to the operating income.

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