The following statement of cash flows has been provided by Davo’s Surf Shop of Malibu, California:

Davo’s Surf Shop Statement of Cash Flows For the Year Ended December 31, 2000 Cash flows from operating activities $ 225,000 Cash flows from investing activities:

Investment in Susie’s Swim-Wear, Ltd. $ (215,000)

Purchase of marketable securities (550,000)

Proceeds from sale of building 1,000,000 235,000 Cash flows from financing activities:

Proceeds from debt issuance $ 600,000 Gift from friends and family 400,000 Payment of dividends (200,000) 800,000 Net increase in cash $1,260,000 Required

a. Explain and discuss each item that resulted in a change in cash for Davo’s Surf Shop.

b. Based on this limited information for only one year, evaluate Davo’s future prospects.

c. What other information would be helpful in evaluating Davo’s prospects?