Financial Statement Analysis Case

Vermont Teddy Bear Co.

Founded in early 1980s, the Vermont Teddy Bear Co. designs and manufatures American-made teddy bears and markets them primarly as gits called Bear-Grams or Teddy Bear-Grams. Bear-Grams are personalized teddy bears delivered directly to the recipient for special occasions such as birthdays and anniversaries. The Shelburne, Vermont, companys primary markets are New York, Boston and Chicago Sales have jumped dramatically in recent years. Such dramatic growth has significant implications for cash flows. Provided below are the cash flow statements for two recent years for the company.

Instructions:

Note that net income in the current year was only $17,523 compared to prior year income of $838,955, but net cash flow from operating activities was $236,480 in the current year and a negative $700,957 in the prior year. Explain the causes of this apparent paradox.

Evaluate Vermot Teddy Bears liquidity, solvency, and profitability for the current year using cash flow-based ratios.