S12-3. (Learning Objective 2: Performing vertical analysis to correct a cash shortage) Craft Software reported the following amounts on its Balance Sheets at December 31, 20X6, 20X5, and 20X4:

Sales and profits are high. Nevertheless, Craft is experiencing a cash shortage. Perform a vertical analysis of Craft Software’s assets at the end of years 20X6, 20X5, and 20X4. Use the analysis to explain the reason for the cash shortage.

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(In thousands) 20X6 20X5 Cash. $ 7,800 $ 2,250 20X4 $ 2,000 Receivables, net. 36,400 22,500 Inventory...... 270,400 198,000 24,000 148,000 Prepaid expenses. 10,400 18,000 12,000 Property, plant and equipment, net 195,000 209,250 214,000 Total assets. $520,000 $450,000 $400,000