Purpose of statement of cash flows (Learning Objective 1) 5–10 min.

Icemountain, Inc., experienced an unbroken string of 10 years of growth in net income.

Nevertheless, the business is facing bankruptcy. Creditors are calling all of Icemountain’s outstanding loans for immediate payment, and Icemountain, Inc., has no cash available to make these payments because managers placed undue emphasis on net income and gave too little attention to cash flows.

Write a brief memo in your own words to explain to the managers of Icemountain, Inc., the purposes of the statement of cash flows.

AppendixLO1