Statement of Cash Flows and Cash Burn or Build Cindy and Robert Castillo founded the Castillo Products Company in 2015. The company manufactures components for personal decision assistant (PDA) products and for other hand-held electronic products. Year 2015 proved to be a test of the Castillo Products Company's ability to survive. However, sales increased rapidly in 2016 and the firm reported a net income after taxes of $75,000. Depreciation expenses were $40,000 in 2016. Following are the Castillo Products Company's balance sheets for 2015 and 2016. CASTILLO PRODUCTS COMPANY 2015 2016 Cash Accounts Receivables Inventories Total Current Assets Gross Fixed Assets Accumulated Depreciation Net Fixed Assets Total Assets $55,000 200,000 400,000 655,000 450,000 -100,000 350,000 $1,005,000 $20,000 280,000 500,000 800,000 540,000 -140,000 400.000 $1,200,000 Accounts Payable Accruals Bank Loan Total Current Liabilities Long-Term Debt Common Stock ($.01 par) Additional Paid-in-Capital Retained Earnings Total Liabilities & Equity $135,000 50.000 90.000 275,000 300,000 150,000 200,000 80.000 $1,005,000 $160,000 70,000 100,000 330,000 400,000 150,000 200,000 120,000 $1,200,000 D. Prepare a formal statement of cash flows for 2016 and identify the major cash inflows and outflows that were generated by the Castillo Company. (A template is provided for you on the next page) E. Use your calculation results from Parts A and B above to determine whether Castillo was building or burning cash during 2016 and indicate the dollar amount of the cash build or burn. $40,000 profit made during 2016? F. If Castillo had a net cash burn from operating and investing activities in 2016 divide the amount of burn by 12 to calculate an average monthly burn amount. If the 2017 monthly cash burn continues at the 2016 rate, indicate how long in months it will be before the firm runs out of cash if there are no changes in financing activities. E. Use your calculation results from Parts A and B above to determine whether Castillo was building or burning cash during 2016 and indicate the dollar amount of the cash build or burn. F. If Castillo had a net cash burn from operating and investing activities in 2016 divide the amount of burn by 12 to calculate an average monthly burn amount. If the 2017 monthly cash burn continues at the 2016 rate, indicate how long in months it will be before the firm runs out of cash if there are no changes in financing activities. CASTILLO PRODUCTS COMPANY Statement of Cash Flows 2016 (10,000) Cash from Operating Activities: Net income + Depreciation -Increase in accounts receivable - Increase in inventories +Increase in accounts payable +Increase in accrued liabilities Net from Operating Activities Cash from Investing Activities: - Increase in gross fixed assets Net from Investing Activities Cash from Financing Activities: + Increase in bank loan + Increase in long-term debt Cash dividends paid Net from Financing Activities Total net cash increase (decrease) 100,000 (35,000) 65,000 (35,000) Cash at beginning of period Total net cash increase (decrease) Cash at end of period 55,000 (35,000) 20,000