Juana del Pueblo is preparing for a meeting with the president of Banco Impopular to discuss the performance of the operations of her business, which is ending its fourth year of operations. In the first year, cash flow from operating activities was negative. In the second and third years, cash flows from operations were positive. However, in year 4, the cost of inventory will increase significantly and cash flows from operations will likely decrease by 25%.

The purpose of the meeting with the president of the Bank is to secure a line of credit for unforeseen business events. From experience, Jane knows that the bank will evaluate cash flows from operating activities for years 1 through 4 and request projections for years 5. She also recognizes that steady growth in operating cash flows for years 1 through 4 will be beneficial for the application of the line of credit. She therefore decides to use her position as owner and is considering various business actions that will change the cash flow from operating activities at 4 from a decrease to an increase.

required:

a. Explain three business actions Juana del Pueblo could take to improve cash flows from operating activities and get the line of credit approved.

b. Comment on the ethics and possible consequences of Juana del Pueblo's decision to carry out the actions above.

c. Explain why the banker emphasized the operating activities of the Cash Flow Statement, to grant the line of credit instead of analyzing the investment and financing activities.