At the beginning of 2015, Mary Abrahams purchased a small business, theMaitzCompany, whose income statement and balance sheets are shown below.

The firm has been profitable, but Abrahams has been disappointed by the lack of cash flows. She had hoped to have about $10,000 a year available for personal living expenses. However, there never seems to be much cash available for purposes other than business needs. Abrahams has asked you to examine the financial statements and explain why, although they show profits, she does not have any discretionary cash for personal needs. She observed, "I thought that I could take the profits and add back depreciation to find out how much cash I was generating. However, that doesn't seem to be the case. What's happening?"

Question 1Given the information provided by the financial statements, what would you tell Abrahams? (As part of your answer, calculate the firm's cash flows.)

Question 2How would you describe the cash flow pattern for theMaitzCompany?