Question 3 of 34 You are working with the corporate finance team at your company to estimate how the company's Net Cash Flow will differ from its Net Income in the current quarter. The team has made the following estimates for various line items this quarter: . Operating Income of $200. .Net Interest Expense of $10. - Depreciation of $10. ⚫ Accounts Receivable has increased by $50. . The company has purchased $40 of Inventory and not yet delivered it to customers in the form of finished products. . The company has paid for $30 of annual property insurance upfront in cash, but the policy begins next quarter. . The company has collected $40 in cash from customers without delivering the associated products/services. . The company spent $20 on Capital Expenditures (CapEx). . And the company issued $30 in Common Dividends to its shareholders. Based on this information, how much of a DIFFERENCE will there be between Net Income and Net Cash Flow? Assume a 25% tax rate. A Net Income will be higher by $140. B Net Income will be higher by $135. C Net Income will be higher by $120. D Net Income will be higher by $100.

Financial Accounting: The Impact on Decision Makers
10th Edition
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Gary A. Porter, Curtis L. Norton
Chapter12: The Statement Of Cash Flows
Section: Chapter Questions
Problem 12.19E
Question
Question 3 of 34
You are working with the corporate finance team at your company to estimate how the company's Net Cash Flow will differ
from its Net Income in the current quarter. The team has made the following estimates for various line items this quarter:
. Operating Income of $200.
.Net Interest Expense of $10.
- Depreciation of $10.
⚫ Accounts Receivable has increased by $50.
. The company has purchased $40 of Inventory and not yet delivered it to customers in the form of finished products.
. The company has paid for $30 of annual property insurance upfront in cash, but the policy begins next quarter.
. The company has collected $40 in cash from customers without delivering the associated products/services.
. The company spent $20 on Capital Expenditures (CapEx).
. And the company issued $30 in Common Dividends to its shareholders.
Based on this information, how much of a DIFFERENCE will there be between Net Income and Net Cash Flow? Assume a 25%
tax rate.
A
Net Income will be higher by $140.
B
Net Income will be higher by $135.
C
Net Income will be higher by $120.
D
Net Income will be higher by $100.
Transcribed Image Text:Question 3 of 34 You are working with the corporate finance team at your company to estimate how the company's Net Cash Flow will differ from its Net Income in the current quarter. The team has made the following estimates for various line items this quarter: . Operating Income of $200. .Net Interest Expense of $10. - Depreciation of $10. ⚫ Accounts Receivable has increased by $50. . The company has purchased $40 of Inventory and not yet delivered it to customers in the form of finished products. . The company has paid for $30 of annual property insurance upfront in cash, but the policy begins next quarter. . The company has collected $40 in cash from customers without delivering the associated products/services. . The company spent $20 on Capital Expenditures (CapEx). . And the company issued $30 in Common Dividends to its shareholders. Based on this information, how much of a DIFFERENCE will there be between Net Income and Net Cash Flow? Assume a 25% tax rate. A Net Income will be higher by $140. B Net Income will be higher by $135. C Net Income will be higher by $120. D Net Income will be higher by $100.
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