Question
The 2020 financial statements of Green Company include the following statement of cash flows: GREEN COMPANY Statement of Cash Flows For the year ended December
The 2020 financial statements of Green Company include the following statement of cash flows:
GREEN COMPANY
Statement of Cash Flows
For the year ended December 31, 2020
Operating:
Net income
$ 644,000
Adjustments to convert to cash:
Depreciation expense
230,000
Gain on sale of operating assets
(14,000)
Change in current assets other than cash
(120,000)
Change in current liabilities
80,000
Cash provided by operations
$820,000
Investing:
Purchase of property, plant, and equipment
$(1,200,000)
Proceeds from the sale of property, plant, and equipment
400,000
Cash used for investing
(800,000)
Financing:
Issuance of shares
1,000,000
Retirement of bonds
(1,300,000)
Dividends paid
(250,000)
Cash used for financing
(550,000)
Decrease in cash
$(530,000)
Required: Answer the following questions and explain. Please provide your response in the highlighted column below.
Your response
Required
a.Did Green Company increase or decrease its current assets, other than cash, during 2020?
Is this change consistent with an increase in sales, or a decrease in sales, during the period? Explain why.
b.From an investor's point of view, has Green Company become more risky or less risky in 2020? Explain why.
c.Does Green Company appear to be expanding or contracting its operations? How can you tell?
What other financial statement information might you examine to determine whether the company is expanding or contracting its operations?
d.Does Green Company appear to be able to maintain its productive capacity without additional financing? Explain why.
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