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 color prints. To compete with other camera departments, June’s offers fast, efficient, and effective repairs and photographic processing. For fiscal 2009 and 2008, June’s accountant prepared the following statements of cash flows:

June’s Camera Shop Statements of Cash Flows For the Years Ended January 31, 2009 and 2008 2009 2008 Cash flows from operating activities Net income $ 87,000 $ 63,000 Adjustments to reconcile net income to net cash provided by operating activities:

Increase in accounts receivable $(17,000) $(12,000)

Increase in inventory (19,000) (11,000)

Increase in accounts payable 15,000 14,000 Increase in wages payable 11,000 5,000 Increase in income taxes payable 6,000 3,000 Depreciation expense 41,000 37,000 Total adjustments 37,000 36,000 Net cash provided by operating activities

$124,000 $ 99,000 Cash flows from investing activities Purchase of long-term investments $(15,000) $(10,000)

Purchase of equipment (45,000) (40,000)

Net cash used by investing activities (60,000) (50,000)

Cash flows from financing activities Principal payments on mortgage $(15,000) $(15,000)

Payment of dividends (12,000) (10,000)

Net cash used by financing activities (27,000) (25,000)

Net increase in cash and cash equivalents $ 37,000 $ 24,000 Cash and cash equivalents at beginning of year 158,000 134,000 Cash and cash equivalents at end of year $195,000 $158,000 Required:

. Does June’s Camera Shop appear to have grown in size during the past two years?

. 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 2009 and 2008 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?

. How long should it take June’s Camera Shop to pay back the $125,000?

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