Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

5. You were recently hired as a junior financial analyst for LIFO the Party Ltd., a fund that invests in high potential in Canadian companies.

image text in transcribed

5. You were recently hired as a junior financial analyst for LIFO the Party Ltd., a fund that invests in high potential in Canadian companies. On your first name, Mr. Maurice, your manager, provides you with the Statement of Cash Flows for Cactus Company (below) and asks you to respond to the questions below. Cactus Company Statement of Cash Flows For the year ended December 31, 2020 Operating: Net income $532,000 Adjustments to convert to cash: Depreciation expense 196,000 Gain on sale of operating assets (22,000) Change in current assets other than cash (132,000) Change in current liabilities 97,000 Cash provided by operations Investing: Purchase of property, plant, and equipment $(1,400,000) Proceeds from the sale of property, plant, and equipment 750,000 Cash used for investing Financing: Issuance of shares 800,000 Retirement of bonds (750,000) Dividends paid (450,000) Cash used for financing Decrease in cash $671,000 (650,000) (400,000) $(379,000) a) Did Cactus Company increase or decrease its working capital, other than cash, during 2020? Is this change consistent with an increase in sales, or a decrease in sales, during the period? Explain. b) From an investor's point of view, has Cactus Company become more risky or less risky in 2020? Explain. c) Does Cactus Company appear to be expanding or contracting its operations? How can you tell? d) What other financial statement information might you examine to determine whether the company is expanding or contracting its operations? e) If the Company is reporting under International Financial Reporting Standards (IFRS), what valid accounting policy choices could it make that could affect cash provided by operations? Explain

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

ISE Fundamental Managerial Accounting Concepts

Authors: Thomas Edmonds, Christopher Edmonds, Mark Edmonds, Philip Olds

9th Edition

1260565483, 9781260565485

More Books

Students also viewed these Accounting questions

Question

What research interests does the faculty member have?

Answered: 1 week ago

Question

Explain the process of MBO

Answered: 1 week ago

Question

OUTCOME 3 Determine how to design pay systems.

Answered: 1 week ago