Answer: 895.

## Explanation To calculate cash flow from operating activities, we start with net income and make adjustments for non-cash items and changes in working capital. **Given:** - Net income = £860 million - No acquisitions or sales of PP&E - No write-downs **Step 1: Calculate depreciation expense** Accumulated depreciation increased from £80 million to £120 million, so: Depreciation expense = £120 - £80 = £40 million **Step 2: Calculate changes in working capital** 1. **Accounts receivable**: Increased from £55 to £65 = Increase of £10 million - An increase in accounts receivable means less cash collected, so subtract £10 million 2. **Inventory**: Decreased from £140 to £120 = Decrease of £20 million - A decrease in inventory means less cash tied up in inventory, so add £20 million 3. **Accounts payable**: Decreased from £40 to £25 = Decrease of £15 million - A decrease in accounts payable means more cash paid to suppliers, so subtract £15 million **Step 3: Calculate cash flow from operations** Cash flow from operations = Net income + Depreciation expense - Increase in accounts receivable + Decrease in inventory - Decrease in accounts payable = £860 + £40 - £10 + £20 - £15 = £860 + £40 = £900 = £900 - £10 = £890 = £890 + £20 = £910 = £910 - £15 = £895 million **Therefore, the correct answer is B. 895.** **Verification:** - Starting with net income: £860 - Add back non-cash depreciation: +£40 = £900 - Adjust for working capital changes: - Accounts receivable increase: -£10 = £890 - Inventory decrease: +£20 = £910 - Accounts payable decrease: -£15 = £895 This matches option B.

Author: LeetQuiz .