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for a pro A. Estimate the survival or SubRay Corporation to break even next B. Assume that the product selling price is $50 per 6. (Statement of Cash Flows and Cash Burn or Build) Cindy and Robert (Rob) Castillo founded the Castillo terms of the number of units that will have to be sold next year. products and for other handheld electronic products. Year 2015 proved to be a test of the Castillo Pro Products Company in 2015. The company manufactures components for personal decision assistant net income after taxes of $75,000. Depreciation expenses were $40,000 in 2016. Following are the Cas. ducts Company's ability to survive. However, sales increased rapidly in 2016, and the firm reported a tillo Products Company's balance sheets for 2015 and 2016. CASTILLO PRODUCTS COMPANY 2015 BALANCE SHEET Cash Accounts receivable Inventories Total current assets Gross foed assets Accumulated depreciation Net foued assets Total assets $ 50,000 200.000 400.000 650,000 450,000 -100,000 350,000 $1,000,000 2016 $ 20,000 280,000 500.000 800,000 540,000 -140,000 400.000 $1,200,000 Accounts payable Accruals Bank loan Total current liabilities Long-term debit Common stock /S 01 par) Additional paid-in-capital Retained earnings Total liabilities and equity $ 130,000 50,000 90.000 270.000 300,000 150,000 200,000 80,000 $1,000,000 $ 160,000 70.000 100,000 330,000 400,000 150,000 200,000 120.000 $1,200.000 A. Calculate Castillo's cash flow from operating activities for 2016. B. Calculate Castillo's cash flow from investing activities for 2016. C. Calculate Castillo's cash flow from financing activities for 2016. D. Prepare a formal statement of cash flows for 2016 and identify the major cash inflows and outflows that were generated by the Castillo Products Company. to determine whether Castillo was building er Chapter 4: Preparing and Using Financial Statements 155 CASTILLO PRODUCTS COMPANY 2016 INCOME STATEMENT Net sales Cost of goods sold Gross profit Marketing General and administrative Depreciation EBIT Interest Earnings before taxes Income taxes Net income (loss) 2015 $900,000 -540,000 360,000 -90,000 -250,000 -40,000 -20,000 -45,000 -65,000 0 -$ 65,000 $1,500,000 -900.000 600,000 - 150,000 -250,000 -40.000 160,000 -60,000 100,000 -25,000 $ 75,000 "Includes tax loss carryforward from 2015 A. Calculate each income statement item for 2015 as a percentage of the 2015 sales level. Make the same calculations for 2016. Determine which cost or expense items varied directly with sales for the two- year period. B. Use the information in Part A to classify specific expense items as being either variable or fixed ex- penses. Then estimate Castillo's EBDAT breakeven in terms of survival revenues if interest expenses had remained at the 2015 level ($45,000) in 2016. C. Estimate the dollar amount of survival revenues actually needed by the Castillo Products Company to reach EBDAT breakeven in 2016, given that more debt was obtained and interest expenses in- creased to $60,000. 14 On pages 154 and 155 of our text, you will find financial statements for Castillo Products Company 1. Using the 2016 income statement and the balance sheets, prepare a statement of cash flows Here's a tip: Compare the 2016 net income to the change in retained earnings from 2015 to 2016. If the change in retained earnings is less than net profit, they paid dividends to the owners. 2. Using the 2016 income statement, calculate the EBDAT breakeven point. Show your math 3. From your calculations, the financial statements provided, and the description in the text, what advice related your findings in questions one and two would you share with the owners? Show critical thinking here - more than the obvious