Part One: Statement of Cash Flows Analysis
You are given the following information for Barko Industries:
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Barko Industries
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Balance Sheet (Partial)
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Year 3
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Year 4
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| Cash |
$70,000
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$9,640
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| AR |
70,000
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85,000
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| Inventories |
87,000
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84,000
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| Accounts Payable |
48,000
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51,000
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Barko Industries
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Income Statement
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For the Year Ending December 31, Year 4
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| Sales |
$560,000
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| Operating Expenses |
$420,000
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| Depreciation Expense |
46,000
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466,000
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| Income Before Taxes |
$94,000
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| Income Tax Expense |
$37,600
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| Net Income |
$56,400
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Other Data:
- Barko Industries sold an asset and recorded a loss on the sale of $8.700. The sale price was $220,000 and the asset was originally purchased for $360,000.
- Dividends paid in Year 4 were $22,460.
Required:
- Prepare a statement of cash flows for the year ending December 31, Year 4 using the indirect method.
- What conclusions could you arrive at regarding the cash position of the firm?
- What information was provided in the statement of cash flows that was not evident if just the balance sheet and the income statement were examined? How might that information affect management decisions?
Part Two: Final Project Week 3: Investing and Financing Activities; Interim Report of Findings
Examine the statement of cash flows for the companies you selected in Week 1 for the most recent year. Address the following concerns:
- What are the two largest investing activities and financing activities for each firm?
- Compare and contrast the investing and financing activities of the two companies.
- Evaluate the investing and financing strategies of the two firms? Provide a rationale for your opinion as to the effectiveness of each of the strategies.
Required:
- Prepare a report that addresses the above questions.
- The report should also summarize your key findings for the two companies for Weeks 1 to 3 of the Final Project.
