Aqua Swimming Club's financial statements follow.

Aqua Swimming Club
Statement of Retained Earnings
For the Month Ended November 30, 2014
Retained earnings, October 31, 2014....................$34,975
Net income for the month....................................2,900
Subtotal......................................................$37,875
Less dividends................................................2,500
Retained earnings, November 30, 2014.................$35,375

Required
1. Explain how Aqua Swimming Club's four statements relate to each other.
2. Which statements are most closely associated with the goals of liquidity and profitability? Why?
3. If you were the CEO of this business, how would you evaluate the company's performance? Give specific examples.
4. If you were a banker considering Aqua Swimming Club for a loan, why might you want the company to be audited by an independent CPA? What would the audit tell you?

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Aqua Swimming Club Income Statement For the Month Ended November 30, 2014 Revenues: imming lesson revenue Locker rental revenue Total revenues $4,650 1,275 $5,925 Expenses: Salaries expense Supplies expense Utilities expense Total expenses $1,125 750 450 2,325 $3,600 700 Income before income taxes expense Income taxes expense Net income Aqua Swimming Club Balance Sheet November 30, 2014 Assets Liabilities Cash Accounts receivable Supplies Land Building Equipment lotal assets S 6,325 900 750 15,750 22,500 7,500 $53,725 Accounts payable $13,350 Stockholders'Equity Common stock Retained earnings 5,000 35,375 Total liabilities and stockholders' equity $53,725 Aqua Swimming Club Statement of Cash Flows For the Month Ended November 30, 2014 Cash flows from operating activities: Net income $2,900 Adjustments to reconcile net income to net cash flows from operating activities: Increase in accounts receivable Inc $ (400) (550) 400 rease in supplies Increase in accounts payable Net cash flows from operating activities (550) $2,350 Cash flows from investing activities: Sale of equipment Purchase of equipment Net cash flows from investing activities 2,000 (1,000) 1,000 Cash flows from financing activities: Issuance of common stock Dividends paid Net cash flows from financing activities 5,000 (2,500) 2,500 $5,850 475 $6,325 Net increase in cash Cash at beginning of month Cash at end of month