(Learning Objectives 1, 2, 3: Explaining the purposes of the statement of cash fl ows)

Rondeau Ltd. has experienced an unbroken string of nine years of growth in net income.

Nevertheless, the company is facing bankruptcy. Creditors are calling all of Rondeau’s loans for immediate payment, and the cash is simply not available. It is clear that the company’s top managers overemphasized profi ts and gave too little attention to cash fl ows.

❙ Requirement 1. Write a brief memo, in your own words, to explain to the managers of Rondeau Ltd the purposes of the statement of cash fl ows.