Analyzing Clime Custom Bicycle

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Chapter 3
Analyzing Cline Custom Bicycles’ Cash Flows
Roxette D. Gonzales
BSBA III- FM A

Darin Cline, formerly an internationally renowned professional bicycle racer, owns and operates Cline Custom Bicycles—a firm that builds and markets custom bicycles to shops throughout the United States. He has just received his firm’s 2000 income statement, balance sheet, and statement of retained earnings. Although he is quite pleased to have achieved record earnings of $ 106, 000 in 2000, Darin is concerned about the firm’s cash flows. Specifically, he is finding it more and more difficult to pay the firm’s cash flows. Specifically, he is finding it more and more difficult to pay the firm’s bills in a timely manner. To gain insight into the firm’s cash flow problems, Darin is planning to have the firm’s 2000 statement of cash flows prepared and evaluated.

Required
a. Use the financial data presented to prepare Cline Custom Bicycles’ statement of cash flows for the year ended December 31, 2000.

Cline Custom Bicycles
Statement of Cash Flows ($000)
For the Year ended Dec 31, 2000

Cash flow from Operating Activities
Net Profit after Taxes$ 106
Depreciation 30
Decrease in Accounts Receivable 30
Increase in Inventories (140)
Increase in Accounts Payable 70_
Cash provided by operating activities __96__

Cash flow from Investing Activities
Increase in Gross Fixed Assets (40) _
Cash provided by investment activities __ (40) __

Cash flow from Financing Activities
Increase in Notes Payable 20
Decrease in Long Term Debt (30)
Dividends Paid _ (76) _
Cash provided by financing activities__ (86) __
Net decrease in cash and marketable securities (30)

b. Evaluate the statement prepared in a in light of Cline’s current cash flow difficulties. Through the preparation of Cash flows for the Cline’s company, we could see that there is...
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