Cash flows from operating activities
Cash receipts from customers	$45,800,000
Cash paid to suppliers	(29,800,000)
Cash paid to employees	(11,200,000)
Cash generated from operations	4,800,000
Interest paid	(310,000)
Income taxes paid	(1,700,000)
Net cash from operating activities		$2,790,000
Cash flows from investing activities
Purchase of property, plant, and equipment	(580,000)
Proceeds from sale of equipment	110,000
Net cash used in investing activities		(470,000)
Cash flows from financing activities
Proceeds from issuance of common stock	1,000,000
Proceeds from issuance of longterm debt	500,000
Principal payments under capital lease obligation	(10,000)
Dividends paid	(450,000)
Net cash used in financing activities		1,040,000
Net increase in cash and cash equivalents		3,360,000
Cash and cash equivalents at beginning of period		1,640,000
Cash and cash equivalents at end of period		$5,000,000

Additional Information:

Creditors balance for the year ended 12/31/x1 is $25000.

Long term loan balance is $50000.

Accrued expenses of $1500.

Required:

Calculate the following ratios:

Short term liquidity

Internal cashgenerating capacity

Debt reliance

Cash adequacy Formulas:

Short term Liquidity = Cash flow from operation (CFFO)/Current debts (CL) =>Ability to generate cash internally to meet current obligations.

Internal cash generating capacity = RCFFO/TCI ( total cash inflow) =CFFO [Interest paid (INT) +Dividends paid /(DIF + AIF + EIF + RCFFO =CFFO [Interest paid (INT) +Dividends paid /(Debt inflow (cash inflow from borrowings) DIF + Asset inflows(proceeds from sale of assets) AIF + Equity inflow (cash proceeds from share issues) EIF + RCFFO => indicates the proportion of internally generated cash relative to total cash inflows.

Debt reliance = DIF (Debt inflow cash inflow from borrowings)/TCI ( total cash inflow) =Debt inflow (cash inflow from borrowings)/DIF + AIF + EIF + RCFFO =Debt inflow (cash inflow from borrowings)/Debt inflow (cash inflow from borrowings) + Asset inflows(proceeds from sale of assets) + Equity inflow (cash proceeds from share issues) + RCFFO. => indicates the extent of reliance on borrowed funds Cash Adequacy = CFFO/(DR+AP+ INT+ DP) =Cash flow from operation/Debts repayments (DR)+ Asset purchase (AP)+Interest paid (INT)+ Dividends paid (DP) =>ability to generate cash internally to meet primary cash requirements. The greater the ratio the better the coverage.