A company’s cash sales in January are $200,000, its accounts receivabl

A company’s cash sales in January are $200,000, its accounts receivable payments for January are $100,000, its beginning cash for January is $50,000, and there are no other cash inflows for January.

Its accounts payable payments for January are $200,000 and its wages and salaries for January are $100,000, and its interest payments for January are $50,000. What is its net cash flow for January if there are no other outflows for January?
What will be an ideal response?

ANSWER

Answer: The total incoming cash flow for January = cash sales for January + accounts receivable payments for January (which are inflows from prior months’ sales) = $200,000 + $100,000 = $300,000. The total outgoing cash flow for January = accounts payable payments for January + wages and salaries for January + interest payment for January = $200,000 + $100,000 + $50,000 = $350,000. Thus, its net cash flows for January are total incoming cash flow for January – total outgoing cash flow for January = $300,000 – $350,000 = -$50,000.