Integrative Problem

Presented here are a statement of income and retained earnings and comparative balance sheets for Gallagher, Inc., which operates a national chain of sporting goods stores.

Gallagher, Inc. Statement of Income and Retained Earnings For the Year Ended December 31, 2016 (all amounts in thousands of dollars)
Net sales		$48,000
Cost of goods sold		36,000
Gross profit		$12,000
Selling, general, and administrative expense		6,000
Operating income		$6,000
Interest expense		280
Income before tax		$5,720
Income tax expense		2,280
Net income		$3,440
Preferred dividends		100
Income available to common		$3,340
Common dividends		500
To retained earnings		$2,840
Retained earnings, 1/1		12,000
Retained earnings, 12/31		$14,840

Gallagher, Inc. Comparative Balance Sheets December 31, 2016 and 2015 (all amounts in thousands of dollars)
		December 31
		2016		2015
Cash		$840		$2,700
Accounts receivable		12,500		9,000
Inventory		8,000		5,500
Prepaid insurance		100		400
Total current assets		$21,440		$17,600
Land		$4,000		$4,000
Buildings and equipment		12,000		9,000
Accumulated depreciation		(3,700)		(3,000)
Total long-term assets		$12,300		$10,000
Total assets		$33,740		$27,600
Accounts payable		$7,300		$5,000
Taxes payable		4,600		4,200
Notes payable		2,400		1,600
Current portion of bonds		200		200
Total current liabilities		$14,500		$11,000
Bonds payable		1,400		1,600
Total liabilities		$15,900		$12,600
Preferred stock, $5 par		$1,000		$1,000
Common stock, $1 par		2,000		2,000
Retained earnings		14,840		12,000
Total stockholders equity		$17,840		$15,000
Total liabilities and stockholders equity		$33,740		$27,600

Required:

1. Prepare a statement of cash flows for Gallagher, Inc., for the year ended December 31, 2016, using the indirect method in the Operating Activities section of the statement. If an answer is zero, please enter zero ("0"). Use the minus sign to indicate cash outflows, a decrease in cash, or cash payments.

Gallagher, Inc.
Statement of Cash Flows
For The Year Ended December 31, 2016 (In Thousands of Dollars)
Cash flows from operating activities
Net income	$
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense
Increase in accounts receivable
Increase in inventory
Decrease in prepaid insurance
Increase in accounts payable
Increase in taxes payable
Net cash provided by operating activities	$
Cash flows from investing activities
Acquisition of buildings and equipment	$
Net cash used by investing activities	$
Cash flows from financing activities
Issuance of additional notes payable	$
Payment of cash dividends
Payment of bonds
Net cash provided by financing activities	$
Net decrease in cash	$
Cash balance, December 31, 2015
Cash balance, December 31, 2016	$

2. Gallagher's management is concerned with its short-term liquidity and its solvency over the long run. To help management evaluate these, compute the following ratios, rounding all answers to two decimal points. For percentages, round to two decimal places before converting to a percentage. For example, 0.881 would be entered as 88. Assume 360 days per year.

a. Current ratio	to 1
b. Acid-test ratio	to 1
c. Cash flow from operations to current liabilities ratio	%
d. Accounts receivable turnover ratio	times
e. Number of days' sales in receivables	days
f. Inventory turnover ratio	times
g. Number of days' sales in inventory	days
h. Debt-to-equity ratio	to 1
i. Debt service coverage ratio	to 1
j. Cash flow from operations to capital expenditures ratio	%