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The Cash Flow Statement direct method (questions 14 – 17): For the remaining questions, please consider the following cash transactions that happened in the company Becker GmbH in 2015 (amounts in €000): · Collections from customers: 500· Purchase of equipment: 40· Payment of dividends: 30· Payment of taxes: 20· Proceeds from sale of equipment: 20· Payment to suppliers: 300· Payment of salaries and administration expenses: 75· Payment of prepaid rent: 5· Acquisition of a long term loan: 90Compute the cash flow from operations (CFO)?

Question

The Cash Flow Statement direct method (questions 14 – 17): For the remaining questions, please consider the following cash transactions that happened in the company Becker GmbH in 2015 (amounts in €000): · Collections from customers: 500· Purchase of equipment: 40· Payment of dividends: 30· Payment of taxes: 20· Proceeds from sale of equipment: 20· Payment to suppliers: 300· Payment of salaries and administration expenses: 75· Payment of prepaid rent: 5· Acquisition of a long term loan: 90Compute the cash flow from operations (CFO)?

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Solution

To compute the Cash Flow from Operations (CFO), we need to consider the cash inflows and outflows related to the company's core business operations.

Here are the steps to calculate CFO using the direct method:

  1. Identify the cash inflows from operating activities:

    • Collections from customers: €500,000
  2. Identify the cash outflows from operating activities:

    • Payment to suppliers: €300,000
    • Payment of salaries and administration expenses: €75,000
    • Payment of taxes: €20,000
  3. Subtract the total cash outflows from the total cash inflows:

    • Cash inflows (€500,000) - Cash outflows (€300,000 + €75,000 + €20,000) = €105,000

So, the Cash Flow from Operations (CFO) for Becker GmbH in 2015 is €105,000.

Please note that other transactions like purchase of equipment, payment of dividends, proceeds from sale of equipment, payment of prepaid rent, and acquisition of a long term loan are not included in the calculation of CFO as they are not part of the company's core business operations.

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