Module 23.3 Converting Direct to Indirect

Question 1

How do you calculate cash collection from customers?

Answer 1

1) Begin with net sales from the income statement
2) Subtract (add) any increase (decrease) in the accounts receivable balance.
3) Add (subtract) an increase (decrease) in unearned revenue.

Question 2

How do you calculate cash payments to suppliers?

Answer 2

1) begin with COGS
2) Add back depreciation or amortization expense if included in COGS
3) Reduce (increase) COGS by any increase (decrease) in the accounts payable balance
4) Add (subtract) any increase (decrease) in the inventory balance.
5) Subtract an inventory write-off that occurred during the period.

Question 3

The common cash flow statement a % of what?

Answer 3

Common cash flow statement is a % of revenue