Calculating and interpreting cash flow from operations. The following items appear in the financial statements of Bamberger Enterprises, a firm offering IT services for Sarbanes Oxley compliance, for a year (amounts in thousands):
|
Sales |
$ 14,600 |
|
Depreciation Expense |
(210) |
|
Income Taxes |
(200) |
|
Other Expenses |
(13,900) |
|
Net Income |
$ 290 |
The changes in the current asset and current liability accounts were as follows:
|
Accounts Receivable |
$780 |
Decrease |
|
Inventories |
80 |
Decrease |
|
Prepayments |
100 |
Decrease |
|
Accounts Payable |
90 |
Increase |
|
Other Current Liabilities |
240 |
Decrease |
a. Compute the amount of cash flow from operations.
b. Comment on the major reasons why cash flow from operations exceeds net income.