PART 2: Company Y: Statement of Cash Flows (201X) End of last year Cash from Ope

Question

PART 2: Company Y: Statement of Cash Flows (201X) End of last year Cash from Operations Operating Activities Net income $ 44,220 Add (sources of cash): Depreciation 20,000 Increase in A/P 29,600 Increase in accruals 4,000 Subtract (uses of cash): Increase in A/R (50,800) Increase in inventories (120,800) Net cash provided by operations ($ 73,780) Cash from Investing Investment in fixed assets (36,000) Cash from Financing Increase in notes payable $ 25,000 Increase in long-term debt 101,180 Payment of cash dividends (22,000) Net cash from financing $ 104,180 Net Change in Cash ($ 5,600) Plus: Cash at beginning of year 57,600 Cash at end of year $ 52,000

What Can You Conclude about Company Y’s Financial Condition from its Statement of Cash Flows?
Briefly discuss
Net operating cash flow (define and find the value)
The change in debt position and why the position changed.
Net change in cash account, what does this mean to the company?

Explanation / Answer

EXPLANATION:

From the given particulars cash flow statement can be prepared as follows:

1.Net Operating Cash flow:

Operating Cash means , cash generated in the form of revenue to the firm. Net cash flow means difference between cash inflows and outflows.

2. Change in debt position:

Change in debt position means increase or decrese of the companies liabilities over the accounting period. in the given problem the change in long term debt is $1,01,180. (increase)

3.Net Change in Cash:

Net Change in Cash is $-5620(negative). so there is outflow to the firm

Company Y Statement of Cash Flow for the year ended 201X Cash flows from operating activities Net income $44,200 Adjustments for: Depreciation $20,000 Increase In accounting payables $29,600 Increase in accruals $4,000 Increase in accounting receivables -$50,800 Increase in inventories -$1,20,800 -$1,18,000 Cash generated from operations -$73,800 Cash flows from investing activities Fixed Assets -$36,000 Cash flows from financing activities Notes Payable $25,000 Increase in long term debt $1,01,180 Payments of cash dividends -$22,000 Net cash used in financing activities $1,04,180 Net change in cash -$5,620 Cash at beginning of the year $57,600 Cash at ending of the year $51,980

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