The Statement of Cash Flows and Credit Analysis}

June's Camera Shop sells cameras and photographic supplies of all types to retail customers. June's also repairs cameras and provides colour prints. To compete with other camera departments, June's offers fast, efficient, and effective repairs and photographic processing. For fiscal 2018 and 2017, June's accountant prepared the following statements of cash flows:

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1. Does June's Camera Shop appear to have grown (in terms of property, plant, and equipment) during the past two years?
2. June's president, June Smith, would like to open a second store. Smith believes that \(\$ 225,000\) is needed to equip the facility properly. The business has \(\$ 100,000\) of cash and liquid investments to apply toward the \(\$ 225,000\) required. Do the data in the 2018 and 2017 statements of cash flow suggest whether or not June's Camera Shop is likely to be able to secure a loan for the remaining \(\$ 125,000\) needed for the expansion?
3. How long should it take June's Camera Shop to pay back the \(\$ 125,000\) ?

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Case

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June's Camera Shop Statements of Cash Flows For the Years Ended January 31, 2018 and 2017 Cash flows from operating activities Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense 2018 $ 87,000 2017 $ 63,000 $41,000 $ 37,000 Increase in accounts receivable (17,000) Increase in inventory (19,000) Increase in accounts payable 15,000 Increase in wages payable 11,000 Increase in income tax payable 6,000 (12,000) (11,000) 14,000 5,000 3,000 Total adjustments 37,000 Net cash provided by operating activities 124,000 36,000 99,000 Cash flows from investing activities Purchase of long-term investments Purchase of equipment Net cash used by investing activities Cash flows from financing activities Principal payments on mortgage Payment of dividends (15,000) (10,000) (45,000) (40,000) (60,000) (50,000) (15,000) (15,000) (12,000) (10,000) Net cash used by financing activities (27,000) (25,000) Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year 37,000 24,000 158.000 134,000 $195,000 $158,000