ABC Company's current financial information (before/without expansion) Dec. 31,19X2 Dec. 31,19X1
Cash $50,000 $70,000
Accounts receivable (net) $120,000 $180,000
Merchandise inventory $350,000 $280,000
Property plant, & equipment $400,000 $300,000
Less: Accumulated depreciation $(170,000) $(100,000)
Total assets $750,000 $730,000
Accounts payable $250,000 $210,000
Income taxes payable $40,000 $10,000
Common stock $240,000 $240,000
Retained earnings $220,000 $270,000
Total liabilities & stock, equity $750,000 $730,000 The firm's accrual-basis income statement revealed the following data:
Cost of goods sold $800,000 selling and administrative expenses $250,000
Depreciation expense $70,000
Income taxes $30,000
Dividends declared and paid during 19X2 $100,000
ABC purchased $100,000 of equipment for cash on August 14. (There was no interest expense.)
I. An overall risk profile of the company based on current economic and industry issues that it may be facing.
II. Current company cash flow
a. You need to complete a cash flow statement for the company using the direct method.
b. Once you’ve completed the cash flow statement, answer the following questions:
1. What does this statement of cash flow tell you about the sources and uses of the company?
2. Is there anything ABC Company can do to improve the cash flow?
3. Can this project be financed with current cash flow from the company?