Refer to the information for Capaz Company in Exercise 13-7.

Required:

1. Present the operating activities section of the statement of cash flows for Capaz Company using the direct method. Assume that other accrued liabilities relate to other expenses on the income statement.

2. What were the major reasons that Capaz was able to report a net loss but positive cash flow from operations? Why are the reasons for the difference between cash flow from operations and net income important to financial analysts?