medium · Principles of Finance financial-statements-markets-wc

If a firm has $50 million in Net Income and $50 million in Cash Flow from Operations, but the accounts show Depreciation was $10 million, what must have happened to Working Capital?

1. Operating assets must have increased by $10 million more than operating liabilities.
2. Net Income and Cash Flow always equal each other whenever a firm carries no debt.
3. The company must have purchased exactly $10 million of new fixed equipment this period.
4. The company must have paid out precisely $10 million in cash dividends to its common shareholders.

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