2-5B. (Measuring cash flows) Calculate the free cash flows for the J. B. Chavez Corporation for the year ended December 31, 2003, both from an asset and a financing perspective. Interpret your results.

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J. B. Chavez Corporation, Balance Sheet at 12/31/02 and 12/31/03 ($000) ASSETS 12/31/02 Cash $ 225 12/31/03 $ 175 Accounts receivable 450 430 Inventory 575 625 Current assets $1,250 $1,230 Plant and equipment $2,200 $2,500 Less: accumulated depreciation (1,000) (1,200) Net plant and equipment $1,200 $1,300 Total assets $2,450 $2,530 LIABILITIES AND OWNERS' EQUITY 12/31/02 12/31/03 Accounts payable $ 250 $ 115 Notes payable-current (9%) 0 115 Current liabilities $ 250 $ 230 Bonds $ 600 $ 600 Owners' equity Common stock $ 300 $ 300 Paid-in capital 600 600 Retained earnings 700 800 Total owners' equity $1,600 $1,700 Total liabilities and owners' equity $2,450 $2,530