Given the following information, construct the statement of cash flow. What happened to the firm's liquidity position during the year?

Net income $16.7

Decrease in accounts receivable 6.1

Increase in accounts payable 13.6

Sale of bonds 55.1 Dividends 14.8

Retirement of bonds 10.8

Increase in inventory 15.2

Depreciation expense 56.0

Cost of goods sold 72.1

Reduction in income taxes payable 5.0

Sale of stock 0.4

Purchase of plant and equipment 91.0

Beginning cash 1.1

Repurchase of stock 5.6

The firm's cash position has increased, but that does not mean the firm is more liquid since inventory and accounts payable increased while accounts receivable declined. You should also note that the firm increased its investment in plant by using the cash generated through depreciation and the issuing of new long-term debt. The earnings and sale of stock did not cover dividends and stock repurchases. This indicates that the firm is more financially leveraged.