Maestrom co. Balance Sheet Assets Year6 Year5 Year 4 Cash 13,773.0 17,875.0 40,0

ID: 2499148 • Letter: M

Question

Maestrom co. Balance Sheet Assets Year6 Year5 Year 4 Cash 13,773.0 17,875.0 40,000.0 Accounts Receivable 170,000.0 120,000.0 50,000.0 Inventroy 140,000.0 110,000.0 80,000.0 Land 50,000.0 50,000.0 50,000.0 Buildings and equipment 100,000.0 100,000.0 100,000.0 Less: Accumulated Depreciation Total assets Liabilities Accounts Payable 145,000.0 90,000.0 30,000.0 Notes Payable - Sharehoklers' Equity Common stock 125,000.0 125,000.0 125,000.0 Retained earnings 143,773.0 132,875.0 125.000.0 Total Liabilities and S/E 413,773.0 347,875.0 280,000.0 For Parts 2 and 3 submit in a Word document, Part2- Compare Maestrom Co.'s net income for Year 5 and 6 to Net Cash Flows from Operating Activities for Year 5 and 6.

Explanation / Answer

Cash flow from operating activities = net income + depreciation – change in working capital

Cash flow from operating activities ( year 5) = 7875 +10000 –((120,000+110,000-90,000)-(50,000+80,000-30,000)

=17875 – 40,000

= -22,125

Cash flow from operating activities (year 6) = 6300 +10000 –((170000+140000+-145000)-(120,000+110,000-90,000))

= 16300 – 25000

= -8700

Year 6

Year 5

Net Income

10898

7875

Cash flow from operating activities

-8700

-22125

In year 6 we can see an appreciation in both net income and cash flow from operating activities. However, cash flows are still negative the reason for this is over investment in working capital.