account-Adjustments to reconcile net income to OCF

by | Aug 20, 2025 | Business

FirstRate Company and subsidiaries

Quality of Earnings
Analysis

(U.S. dollars in
thousands)

Fiscal
year ended December 31,

20X1

20X2

20X3

20X4

20X51

Net income

$23,900

$24,900

$22,000

$18,100

Adjustments to reconcile net income to OCF

Depreciation of property, plant, and equipment

10,500

11,200

11,700

12,000

Gain on disposal of equipment

–

–

–

–

Loss on sale of equipment

900

–

–

–

Changes in working capital accounts

Decrease (increase) in accounts receivable,
net

(2,000)

(8,000)

(11,000)

(13,000)

Decrease (increase) in inventory

(4,400)

(14,000)

(14,900)

(17,700)

Increase (decrease) in accounts payable

2,200

11,100

10,100

15,400

Increase (decrease) in accrued income
tax. payable

(300)

100

(400)

(400)

Increase (decrease) in accrued interest
payable

100

200

400

600

Net cash provided by (used in) operating
activities

$30,900

$25,500

$17,900

$15,000

Ratio of
OCF-to-Net income

Cumulative ratio
of OCF-to-Net income

Student’s
narrative analysis (Limit the length of your analysis to a maximum of 150
words)

Please provide your word
count here

Your response here (please do
not modify the formatting, fonts, colors, and so forth in this document
template)

_____

1For this assignment, the 20X5 currency
amounts come from the SCF in the Topic 3 (Financial Accounting) Assignment you
previously completed. Before completing THIS assignment, be sure you have made any changes or
corrections indicated by your instructor/facilitator on the SCF workbook
tab of your returned Topic 3 assignment to the extent that they relate to the
operating cash flow (OCF) section of your SCF. (Recall that, OCF is the first section of a
SCF, preceding the “investing” CF section of the SCF. In case you remain uncertain about this,net cash provided by operating activities in 20X5 should be $1,300 in your
finalized SCF for 20X5.)

The facilitator
will grade this assignment, assigning up to 100 points for it as follows:

Maximum

Earned

Accuracy
and completeness of financial data and earnings quality ratios

25 points

Clarity
and insightfulness of narrative analysis of the information contained in the
reconciliation schedule and OCF-to-net income ratios

75

Total
points

100
points

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