Question (10) Directions: Click the "Case-link" displayed above and use the information provided in Muebles Mexicanos, Parts B and D to answer this question: In 20Y3, how would you characterize the strength of the company's cash flow? Operating cash flow was positive but not sufficient to support dividends and debt service Operating cash flow was positive and supported both dividends and debt service payments Operating cash flow was stronger in 20Y3 than 20Y2 and was sufficient to service debt and pay dividends Not enough information is provided. Part B Muebles Mexi canos Muebles Mexicanos Balance Sheets (In $000s) As At December 31: 203 20Y2 201 ASSETS Current assets $ 62 42 Cash 51 28 135 44 Accounts receivable 210 173 Inventory 317 243 503 316 Total current assets Fixed assets 138 Gross fixed assets 202 157 73 Less: Accumulated depreciation 82 115 65 Net fixed assets 87 75 6 Other noncurrent assets 7 2 $ $ $ 393 314 TOTAL ASSETS 597 LIABILITIES AND EQUITY Current liabilities $ 177 103 85 Short-term debt 4 4 4 Current portion-LTD 104 Accounts payable 65 51 76 42 Accrued expenses 34 Other current liabilities 7 3 368 219 177 Total current liabilities 4 12 Long-term debt 372 227 189 Total liabilities Owners' equity 125 225 166 TOTAL LIABILITIES AND EQUITY $ 597 $ 314 393 Muebles Mexicanos Part B Muebles Mexicanos Income Statements (In $000s) Years Ended December 31: 203 202 201 Sales $ 2,722 $ 1,500 1,281 Cost of goods sold 1,068 608 512 Gross profit 1,654 892 769 Selling general, and administrative expense Depreciation expense Total SG&A expenses 1,307 690 584 40 24 23 1,347 714 607 Interest expense 39 21 Loss on sale of fixed assets 8 Other expenses 15 6 Income before taxes 245 149 141 Taxes 106 68 62 Net Income $ 139 81 79 Dividends 80 40 40 Retained earnings 59 $ 41 39 220 Part B Muebles Mexicanos Muebles Mexicanos Statement of Cash Flow (in $000s) Year Ended December 31, 20Y3 OPERATING ACTIVITIES 139 Net income Adjustments to reconcile net income to net cash provided (used) by operating activities Depreciation 40 8 Loss on disposition of fixed assets Changes in: (91) (107) Accounts receivable Inventory (5) Other noncurrent assets Accounts payable 39 34 Accruals Other current liabilities 2 Net cash provided by (used in) operating activities $ 59 INVESTING ACTIVITIES (Purchases) of fixed assets $ (80) Proceeds of sale of fixed assets 20 Net cash provided by (used in) investing activities $ (60) FINANCING ACTIVITIES Proceeds from short-term borrowing 74 (Payments) on long-term debt. Cash dividends (paid) (4) (80) Net cash provided by (used in) financing activities (10) Increase (Decrease) in cash and cash equivalents $ (11) Beginning cash and cash equlvalents $ 62 Ending cash and cash equivalents 51 + Cash Flow Summary (In $000s) A (U) Company Name: Muebles Mexicanos VE (U) Line Number Target 20Y2 20Y3 Sales revenue (net (1) 1,500 2,722 A Accounts receivable (16) 1,484 (91) 2,631 Cash collected from sales (3) Cash cost of goods sold (4) (51 (6 (1,068) (107) 39 (608) (37) A Inventory A Accounts payable Cash paid for production Cash from trading activities 14 (7 (631) 853 (1.136) 1,495 (3) + (7)- (8) Cash SG&A expense A Prepaid expenses A Accrued expenses Cash paid for operating costs (690) (9) (1.307) (10) (11) 0 8 34 (682) (1.273) (12) Cash after operations (8)+(12) (13) 171 222 Other Income (expense) (6 (15) (14) A Other current and noncurrent accounts. 6 (3) (15) Income tax expense (68) (106) (16) (17) A Deferred income taxes A Income taxes payable Taxes paid and other income (expense) Net cash after operations. (18) (19) (13)+(19) (20) 68 (124) 98 103 Interest expense A Interest payable (39) (21) (23) (22) (23) (24) (25) (20) + (25) - (26) C Dividends declared or owners' withdrawals (40) (80) A Dividends payable Cash paid for dividends and interest Cash after financing costs. (63) (119) 40 (21) Current portion long-term debt (prior year) Cash after debt amortization (27) (4) (4) (25) (26)+(27) (28) 36 A Fixed assets (29) (34) (60) (30) A Investments 0 A Intangibles Cash paid for plant and investments (31) (32) (34) (60) (28)+(32) (33) Financing surplus (requirement) 2 (85) A Short-term debt (notes payable) A Long-term debt A Preferred stock (34) 18 74 (35) (36) (37) A Common stock Total external financing Financing surplus (requirement)+ Total external financing (38) 18 74 (33) + (38) (11) (39) 20 PROOF: A Cash and marketable securities (40) 20 (11) Commesial Leanet D.eleeee Onlino