If net income is $40,000, current assets decrease by $10,000, and current liabilities increase by $20,000, what is the cash flow from operating activities?

To determine the cash flow from operating activities using net income, you'll need to adjust for changes in current assets and current liabilities.

Start with the net income of $40,000, which reflects the profit for the period but does not account for the actual cash flow impacts related to changes in working capital.

Next, analyze the impact of current assets and current liabilities on cash flow. A decrease in current assets of $10,000 generally indicates an inflow of cash because it means that less cash is tied up in assets like accounts receivable or inventory. Conversely, when current liabilities increase by $20,000, it suggests that more cash is being utilized for operational purposes, leading to an additional inflow of cash because it implies that a company is deferring some cash outflow, such as delaying payments to suppliers or accruing expenses.

So, to calculate the cash flow from operating activities, you adjust the net income by adding the decrease in current assets and the increase in current liabilities:

1. Start with the net income: $40,000
2. Add the decrease in current assets: +$10,000
3. Add the increase in current liabilities: +$20,000

This gives:

Cash Flow from Operating Activities