The income statement and additional data of

Raylor

Services, Inc., follow:

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Part 1

Requirement 1. Prepare

Raylor

Services' statement of cash flows for the year ended

September

30,

2018,

using the indirect method.

Complete the statement one section at a time, beginning with the cash flows from operating activities. (Use parentheses or a minus sign for numbers to be subtracted.)

	Raylor Services, Inc.
	Statement of Cash Flows
	Year Ended September 30, 2018
	Cash flows from operating activities:
	Net income
	Adjustments to reconcile net income to net cash
	provided by operating activities:
	Net cash provided by (used for) operating activities

Part 2

	Cash flows from investing activities:
	Net cash provided by (used for) investing activities

Part 3

	Cash flows from financing activities:
	Net cash provided by (used for) financing activities

Part 4

	Net increase (decrease) in cash during the year
	Cash balance, September 30, 2017
	Cash balance, September 30, 2018

Part 5

Requirement 2. Calculate

Raylor

Services' free cash flow for the year ended

September

30,

2018.

Raylor Services' free cash flow for the year ended September 30, 2018 is $

.

Part 6

Requirement 3. Evaluate

Raylor

Services' cash flows for the year. In your evaluation, mention all three categories of cash flows as well as free cash flow and give the reason for your evaluation.

Raylor

Services' operations provided net cash flows of

$ 71 comma 000$71,000

$ 136 comma 000$136,000

$ 11 comma 000$11,000

$ 76 comma 000$76,000

. The majority of the cash flow came from

financing

investing

operations

, as it should in a successful company. The

$ 71 comma 000 provided by$71,000 provided by

$ 136 comma 000 provided by$136,000 provided by

$ 11 comma 000 used for$11,000 used for

$ 76 comma 000 used for$76,000 used for

investing activities is a good indication that the company is

growing,

selling of assets due to the cash need,

and the net cash

provided by

used for

financing activities of

$ 71 comma 000$71,000

$ 136 comma 000$136,000

$ 11 comma 000$11,000

$ 76 comma 000$76,000

indicates that the company

is able to raise money through equity financing and has sufficient cash and earnings to pay debt and dividends.

is unable to raise money through equity financing, and does not have enough earnings and cash to pay dividends.

is unable to pay dividends.

Part 7

The

negative

positive

free cash flow indicates that the company

should

will not

have free cash available

if an investment opportunity comes along or anticipated cash is needed.

to pay dividends out of the current year's earnings.

to provide pay raises to its employees.

Raylor Services, Inc.

Income Statement

Year Ended September 30, 2018

Revenues:

Sales revenue

$304,000

Dividend revenue

7,000

Total revenues

$311,000

Expenses:

Cost of goods sold

$108,000

Salaries expense

40,000

Depreciation expense

25,000

Advertising expense

16,000

Interest expense

6,000

Income tax expense

13,000

Total expenses

208,000

Net income

$103,000