Questions:
Let's say I sell a product for $100 on credit. Which will be impacted first, operating income or cash flow for operations?

| Metric ($M)     | 2022   | 2023   |
|--------------------|--------|--------|
| Retained Earnings  | 185    | 210    |
| Receivables        | 48     | 59     |
| Inventory          | 67     | 75     |
| Payables           | 99     | 79     |

During the year, the company paid dividends of $50 million in 2023 and the depreciation in the same year was $55 million.

What is the company's cash flow from operations for 2023?

Reference answers:
Cash flow from operations measures the cash generated by a company’s core business activities, while operating income measures the profit earned from those operations. For example, if you sell an item for $100, that sale can be recorded as revenue immediately. However, it won't affect actual cash flows until the payment is received. Therefore, selling a product for $100 will increase operating income right away, but it won't increase cash flow from operations until the cash is actually collected.

Net income = Increase in the retained earnings - dividends paid = $210 - $185 + $50 = $75 million

Change in receivables  = $59 - $48 = $11 million (increase)

Change in inventory = $75 - $67 = $8 million (increase)

Change in payables = $79 - $99 = -$20 (decrease)

1. The depreciation will have to be added to the net income as it is a non-cash expense. $75 + $55 = $130 million

2. The increase in receivables will have to be subtracted from the receivables because it represents a decrease in cash. $130 - $11 = $119 million

3. The increase in the inventory will also be subtracted because it represents a reduction in cash. $119 - $8 = $111 million

4. The decrease in payables represents an outflow of cash so it will also need to be deducted from the net income. $111 million - $20 = $91 million

The cash flow from operations in the year 2023 is $91 million