Introduction to Liquidity 5. Consider the following balance sheet and income statement data for Brothers, Inc. a. Develop a cash flow statement similar to Exhibit 1-2. b. Why is the company able to make a profit when its cash account has gone to a deficit posi- tion? w Cash Accounts receivable Inventory Brothers, Inc. Balance Sheet 12/31/03 (000's) $1,000 Accounts payable 1,500 Operating accruals 1,750 Accrued interest Deferred taxes Debt 3,000 Common stock 800 Retained earnings $6,450 Total $1,250 450 0 0 2,750 1,000 1.000 $6,450 Fixed assets (Accumulated depr.) Total Cash Accounts receivable Inventory Brothers, Inc. Balance Sheet 12/31/04 (000's) $ (100) Accounts payable 1,850 Operating accruals 2,100 Accrued interest Deferred taxes Debt 3,500 Common stock 900 Retained earnings $6,450 Total $ 800 500 50 100 2,000 1,000 2,000 $6,450 Fixed assets (Accumulated depr.) Total Brothers, Inc. Income Statement For the Year Ended 12/31/04 (000's) Sales $9,000 Cost of goods sold 4,000 Gross profit $5,000 Operating expenses: Salaries, advertising, etc. 2,900 Depreciation 100 Operating profit $2,000 Interest 200 Taxes 800 Net profit $1,000 Dividends 0 Addition to retained earnings $1,000 11 Il Introduction to Liquidity 5. Consider the following balance sheet and income statement data for Brothers, Inc. a. Develop a cash flow statement similar to Exhibit 1-2. b. Why is the company able to make a profit when its cash account has gone to a deficit posi- tion? w Cash Accounts receivable Inventory Brothers, Inc. Balance Sheet 12/31/03 (000's) $1,000 Accounts payable 1,500 Operating accruals 1,750 Accrued interest Deferred taxes Debt 3,000 Common stock 800 Retained earnings $6,450 Total $1,250 450 0 0 2,750 1,000 1.000 $6,450 Fixed assets (Accumulated depr.) Total Cash Accounts receivable Inventory Brothers, Inc. Balance Sheet 12/31/04 (000's) $ (100) Accounts payable 1,850 Operating accruals 2,100 Accrued interest Deferred taxes Debt 3,500 Common stock 900 Retained earnings $6,450 Total $ 800 500 50 100 2,000 1,000 2,000 $6,450 Fixed assets (Accumulated depr.) Total Brothers, Inc. Income Statement For the Year Ended 12/31/04 (000's) Sales $9,000 Cost of goods sold 4,000 Gross profit $5,000 Operating expenses: Salaries, advertising, etc. 2,900 Depreciation 100 Operating profit $2,000 Interest 200 Taxes 800 Net profit $1,000 Dividends 0 Addition to retained earnings $1,000 11 Il