CASH FLOWS AT EAST COAST YACHTS Because of the dramatic growth at East Coast Yachts, Larissa decided that the company should be reorganized as a corporation (see our Chapter 1 Closing Case for more detail). Time has passed and, today, the company is publicly traded under the ticker symbol ECY. Dan Ervin was recently hired by East Coast Yachts to assist the company with its short-term financial planning and also to evaluate the companys financial performance. Dan graduated from college five years ago with a finance degree, and he has been employed in the treasury department of a Fortune 500 company since then. The companys past growth has been somewhat hectic, in part due to poor planning. In anticipation of future growth, Larissa has asked Dan to analyze the companys cash flows. The companys financial statements are prepared by an outside auditor. Nearby you will find the most recent income statement and the balance sheets for the past two years.

EAST COAST YACHTS 2020 Income Statement

Sales $550,424,000 Cost of goods sold 397,185,000 Selling, general, and administrative 65,778,000 Depreciation 17,963,000 EBIT $ 69,498,000 Interest expense 9,900,000 EBT $ 59,598,000 Taxes (25%) 14,899,500 Net income $ 44,698,500 Dividends $ 19,374,500 Retained earnings 25,234,000

Larissa has also provided the following information. During the year, the company raised $36 million in new long-term debt and retired $20.3 million in long-term debt. The company also sold $21.8 million in new stock and repurchased $32.08 million. The company purchased $53.5 million in fixed assets and sold $5.046 million in fixed assets.

Larissa has asked Dan to prepare the financial statement of cash flows and the accounting statement of cash flows. She has also asked you to answer the following questions: 1. How would you describe East Coast Yachts cash flows? 2. Which cash flows statement more accurately describes the cash flows at the company? 3. In light of your previous answers, comment on Larissas expansion plans.