Lafayette Film Center (LFC) is a not-for-profit theater that plays independent films. In addition to revenue from theater admissions, LFC relies on concession and caf sales, grants and other external support, theater rental sales, and proceeds from special events and other programs that not only promote appreciation for independent films, but also generate grants and contributions. LFC's new executive director has asked you, as the director of finance, to provide an analysis of the organization's financial position. Refer to Exhibits 14-7 through 14-10, which present LFC's statements of financial position, statements of activities, statements of functional expenses, and statements of cash flows for the years ended December 31, 2018 and 2017.

7.) What was LFC's depreciation expense in 2017 and 2018? Which financial statement(s) provide this information?

8.) Now that receivables constitute a much larger proportion of LFC's assets than in the past, the executive director has asked you to calculate the receivables turnover ratio and average collection period for 2018. a.)Which revenue items will you exclude from the ratio? Why? b.) What is LFC's receivables turnover ratio and average collection period for 2018? Are they favorable or unfavorable? Why? c.) Would you recommend recalculating the receivables turnover ratio using the average of beginning-of-year and end-of-year receivables in the denominator? Why or why not?

9.) Calculate the quick ratio and debt to equity ratio for LFC for 2018 and 2017, as well as the percent change in each from 2017 to 2018. Are these trends favorable or unfavorable? Which presents the greater area of concern for 2018, and why?

10.) Given your answers to the questions above and an overall review of LFC's financial statements, would you characterize LFC's financial position as weak, neutral, or strong? Why?

14-11 Code 4 Change Statements of Financial Position as of March 31, 2017 and 2016 Assets \begin{tabular}{rr} \hline 2017 & \multicolumn{1}{c}{2016} \\ 1,909,606 & $1,044,193 \\ 61,244 & 52,582 \\ 373,788 & 358,632 \end{tabular} allowance for uncollectible pledges of $449,162 in 2017 and $464,486 in 2016 Prepaid expenses and other Investments long ferm Total Assets Liabilities and Net Assets Liabilities Accounts payable Annuity payment liability Total liabilities Unrestricted Net Assets Total Liabilities and Net Assets \begin{tabular}{rr} $202,631 & $172,567 \\ 3,857,262 & 3,679,148 \\ \hline$4,059,893 & $3,851,715 \\ 9,245,913 & 7,282,098 \\ \hline$13,305,806 & $11,133,813 \\ \hline \end{tabular} Lafayette Film Center Statements of Cash Flows for the Years Ended December 31, 2018 and 2017 2018 2017 Operating Activities Change in net assets Adjustments to reconcile change in net assets to net cash provided by/(used in) operating activities Depreciation Contributions restricted for building renovations (Increase)/decrease in operating assets Grants receivable Other receivables Conditional promises to give Prepaid expenses Inventory Deposits Increase/(decrease) in operating liabilities Accounts payable Accrued expenses Deferred revenue Net cash provided by/(used in) operating activities $(680,212)$4,129,254 624,356107,9001,843,396 (424,838)292,666 1,452(33,344) 224,016(16,818) (11,552) 9,108 (59,510) 6,400 (1,510) (5,026)(423,404) (2,732)111,776 31,186 $(227,842)$5,950,406 Investing Activities Payments for property and equipment Net cash/(used in) investing activities $(682,412)$(682,412)$(7,159,362)$(7,159,362) Financing Activities Payments on capital leases Net increase in line of credit Net cash provided by financing activities \begin{tabular}{lr} $(49,336) & $(10,084) \\ 860,510 & 100,000 \\ \hline 811,174 & $89,916 \end{tabular} Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents-beginning of year Cash and cash equivalents-end of year \begin{tabular}{rr} $(99,080) & $(1,119,040) \\ 174,662 & 1,293,702 \\ \hline 75,582 & $174,662 \\ \hline \end{tabular} The accompanying notes are an integral part of these statements. Total Liabilities al. The accompanying notes are an integral part u.... 148 Lafayette Film Center Statements of Activities for the Years Ended December 31, 2018 and 2017