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Len Corp. reported net sales of $300 million last year and generated a net income of $66 million. Last year’s accounts receivable increased by $29 million. What is the maximum amount of cash that Len Corp. received from sales last year?

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Answer:

$37,000,000

Explanation:

When you are preparing a statement of cash flows, you start with net income and then make all necessary adjustments that include any changes in accounts receivables.

Cash flow from operating activities:

Net income                                                $66,000,000

Adjustments to net income:

Increase in accounts receivable             ($29,000,000)

Net cash flows from operating activities $37,000,000

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