The cash flow data of Palomba Pizza Stores for the year ended December 31, 2009, are as follows:

Cash payment of dividends $ 35,000 Purchase of land 14,000 Cash payments for interest 10,000 Cash payments for salaries 45,000 Sale of equipment 38,000 Retirement of common stock 25,000 Purchase of equipment 30,000 Cash payments to suppliers 85,000 Cash collections from customers 250,000 Cash at beginning of year 50,000

a. Prepare a statement of cash fl ows for Palomba showing:

Net cash provided by operating activities.

Net cash provided by or used in investing activities.

Net cash provided by or used in fi nancing activities.

b. Discuss, from an analyst’s viewpoint, the purpose of classifying cash fl ows into the three categories listed above. LO.1