Shah Fabrics, Inc.€™s comparative balance sheets for December 31, 2014 and 2013, follow.

Additional information about Shah Fabrics€™ operations during 2014 is as follows: (a) net income, $112,000; (b) building and equipment depreciation expense amounts, $60,000 and $12,000, respectively; (c) equipment that cost $54,000 with accumulated depreciation of $50,000 sold at a gain of $21,200; (d) equipment purchases, $50,000; (e) patent amortization, $12,000; purchase of patent, $4,000; (f) funds borrowed by issuing notes payable, $100,000; notes payable repaid, $60,000; (g) land and building purchased for $648,000 by signing a mortgage for the total cost; (h) 6,000 shares of $40 par value common stock issued for a total of $200,000; and (i) paid cash dividend, $36,000.

Required
1. Using the indirect method, prepare a statement of cash flows for Shah Fabrics.
2. Why did Shah Fabrics have an increase in cash of $268,800 when it recorded net income of only $112,000? Discuss and interpret.
3. Compute and assess cash flow yield and free cash flow for 2014. (Round to one decimal place.) What is your assessment of Shah Fabrics€™ cash-generatingability?

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Shah Fabrics, Inc. Comparative Balance Sheets December 31, 2014 and 2013 2014 2013 Assets 109,440 301,720 551,560 80,000 Cash Accounts receivable (net) Inventory Prepaid expenses Land Building Accumulated depreciation- building Equipment Accumulated depreciation equipment Patents Total assets 378,240 409,720 451,560 100,000 548,000 (60,000) 132,000 58,000) 16,000 $1,917,520 136,000 (96,000) 24,000 $1,106,720 Liabilities and Stockholders' Equity S 43,000 40,000 Accounts payable Notes payable (current) Accrued liabilities Mortgage payable Common stock, $10 par value Additional paid-in capital Retained earnings Total liabilities and stockholders'equity $ 147,000 49,200 648,000 720,000 228,800 237,720 1,917,520 600,000 148,800 161,720 $1,106,720