See the Excel spreadsheet and the tab labeled Income Statement. Using this information along with the Balance Sheet/Managerial Balance Sheet you prepared, complete the Cash Flow Statement in the tab labeled Cash Flow Statement.

Use your constructed Cash Flow Statement to answer the following questions:

1. When the Working Capital increases from year-end 2009 to year-end 2010 , the cash flow term in the Operating Activities section of the Cash Flow Statement is:
   1. Negative because cash is consumed and to pay for the working capital increase
   2. Positive because cash is released due to the increase in working capital
   3. An imaginary number
   4. Who really knows ??

1. The Net Operating Cash Flow (NOCF) from Operating Activities is:
   1. $939,000
   2. ($939,000)
   3. $739,000
   4. ($739,000)

1. Did the business use cash to purchase capital (equipment etc) in 2010 ?
   1. Yes because the net assets increased from 2009 to 2010 and there was also depreciation
   2. No because the net assets increased from 2009 to 2010 and there was also depreciation
   3. It is not possible to determine this

1. When a business sells a capital asset (for example, they sell one of the chemical plants they own), it makes the capital expenditure term in the Cash Flow from Investing Activities be:
   1. A positive term to indicate cash flowed back into the businesss from the sale
   2. A negative term to indicate cash flowed back into the business from the sale
   3. It all depends on the marginal tax rate
   4. None of the above

1. What was the change in short term borrowings ?
   1. An increase of $1,530,000
   2. An increase of $2,530,00
   3. An increase of $550,000
   4. An increase of $750,000
   5. None of the above

1. The reason why this term is positive in the Cash Flow statement is that:
   1. The business borrowed the cash bringing cash into it
   2. The business bought back stock
   3. The business paid a dividend
   4. The business went bankrupt

1. What was the closing cash position of the business at the end of 2010 ?
   1. It decreased to $330,000
   2. It increased to $530,000
   3. It decreased to $200,000
   4. It increased to $330,000

1. It appears the business increased its working capital and also closed the year with a small decrease in its cash position. Which statement might best summarize your concern about the business based on looking at the Managerial Balance Sheet and the Cash Flow Statement ?
   1. You are not concerned at all
   2. You are pleased that the cash flow from the operating activity of the business is positive before accounting for the change in working capital but wondering why the working capital increased so much

c.You are pleased that the cash flow from the operating activity of the business is positive before the change in working capital but wondering why the working capital increased so much along with whether there are plans to reduce it in the future. And you also want to know how convinced the business they will make money on the additional capital they spent during 2010.

Managerial Balance Sheet (in thousands) 31 Ara 09 31 Ara 10 Invested Capital Cash Working capital requirement Net fixed assets Total Invested Capital $385 4.764 1.430 $6.579 $330 6.880 1.595 $8.805 Capital Employed Short-term debt Long term financing Long term debt Owner's equity Total capital employed $570 6.009 1.180 4.829 $6.579 $2.100 6.705 1.370 5.335 $8.805 2010 Net Sales Cost of goods, sold Selling, general, and administrative expenses Depreciation Earnings before interest and tax Net interest expense Earnings before tax Income tax expense Earnings after tax Dividends $34.760 27.610) 5.500 165 1.485 286 1.199 473 726 220 Balance Sheet (in thousands) 31 Ara 09 31 Ara 10 385 3.310 3.500 $330 4.720 4.800 Cash Accounts Receiveable Inventories Prepaid Expenses Net fixed assets Total Assets 1.430 $8.625 1.595 $11.445 Short-term debt Accounts payable Accrued expenses Long term debt Owner's equity Total Liabilities and owner's equity $570 1.760 286 1.180 4.829 $8.625 $2.100 2255 385 1370 5335) $11.445 Note: The company did not sell any fixed assets in 2010 Managerial Balance Sheet (in thousands) 31 Ara 09 31 Ara 10 Invested Capital Cash Working capital requirement Net fixed assets Total Invested Capital $385 4.764 1.430 $6.579 $330 6.880 1.595 $8.805 Capital Employed Short-term debt Long term financing Long term debt Owner's equity Total capital employed $570 6.009 1.180 4.829 $6.579 $2.100 6.705 1.370 5.335 $8.805 2010 Net Sales Cost of goods, sold Selling, general, and administrative expenses Depreciation Earnings before interest and tax Net interest expense Earnings before tax Income tax expense Earnings after tax Dividends $34.760 27.610) 5.500 165 1.485 286 1.199 473 726 220 Balance Sheet (in thousands) 31 Ara 09 31 Ara 10 385 3.310 3.500 $330 4.720 4.800 Cash Accounts Receiveable Inventories Prepaid Expenses Net fixed assets Total Assets 1.430 $8.625 1.595 $11.445 Short-term debt Accounts payable Accrued expenses Long term debt Owner's equity Total Liabilities and owner's equity $570 1.760 286 1.180 4.829 $8.625 $2.100 2255 385 1370 5335) $11.445 Note: The company did not sell any fixed assets in 2010