Poodle Pets Company has asked for your assistance in preparing its cash flow statement for 20X1. Among other items, its 20X1 income statement shows sales revenue (net) of $270 000, cost of goods sold of $144 000 and salaries expense of

$73 600. You analyse the business’s 20X1 beginning and ending balance sheets and find a beginning cash balance of

$32 400, an increase in accounts receivable of $27 200, an increase in inventory of $8800, an increase in accounts payable of $18 400 and a decrease in salaries payable of $8400. Further investigation shows that the owner withdrew $48 000 and the business sold a vehicle for $22 000, issued a note payable for $32 000 and purchased a truck for $59 200.

Required:

a Using your findings, prepare the business’s 20X1 cash flow statement.

b Calculate the business’s 20X1 operating cash flow margin. If the business’s operating cash flow margin was 10.1 per cent in 20X0, what is your evaluation of the business’s liquidity in 20X1?