This part of the assessment represents the primary steps of understanding the nature of cash flows in a business. Year-to-year comparative balance sheets are used in the analysis. After review and analysis of the data, you will prepare a business memo to outline the sources or uses of specific account cash flows and how these outcomes support your reasoning for approving or denying the loan. The analysis is based upon year-to-year changes of these specific balance sheet sections: Accounts Receivable, Inventory, Accounts Payable, Wages Payable, Plant Property and Equipment, and Long-term Debt.

You will:

Analyze financial data and present the rationale for what your loan committee (you as a member of a team) wants to do on the loan renewal request, and submit supporting documents.

Scenario: You are required to conduct an analysis of specific financial data of Bob Smith, Inc. Bob is an existing bank customer. When the loan to Bob was originally made in 2016, the bank required Bob to increase the YE 2016 cash balance to at least $70,000 to qualify for the interest rate that the bank used for the original loan. This cash balance was required for the bank to make its target yield on the loan created. The Cash Flow Statement and Balance Sheet show an actual YE 2017 cash balance of less than $34,000.

You will need to complete the 2017 Cash Flow Statement. In addition, you will also prepare the Common Sized Financial Statements for the 2 years shown.

XYZ Bank told Bob to increase cash to $70,000 from 2016 to 2017 . But cash increased from $16,566 in 2016 to just $33,411 in 2017 , well short of $70,000. In this assignment, you will review six select changes in the Balance Sheet accounts, highlighted in yellow, to bett er understand how these individual account changes impact overall cash flows. Bob Smith, Inc. Common-Size Balance Sheet \begin{tabular}{|r|r|r|r|l|} \hline \multicolumn{1}{|c|}{ Assets } & 2017 & % & 2016 & % \\ \hline Current Assets & & & \\ \hline Cash & & & \\ \hline Accounts Receivable & & & \\ \hline Inventory & & & \\ \hline Other Current Assets & & \\ \hline Total Current Assets & & \\ \hline \end{tabular} Fixed Assets PP\&E Goodwill other assets Total Fixed Assets Total Assets \begin{tabular}{|r|r|r|c|c|c|} \hline \multicolumn{1}{|c|}{ Liabilities \& Equity } & 2017 & 2016 \\ \hline Current Liabilities & & \\ \hline Accounts Payable & & \\ \hline Wages Payable & & \\ \hline Accrued Income Taxes & & \\ \hline Total Current Liabilities & & \\ \hline & & & \\ \hline Long Term Liabilities & & \\ \hline Long-Term Debt: Bank Notes & & \\ \hline Total Long Term Liabilities & & \\ \hline Total Liabilities & & \\ \hline \end{tabular} Equity Total Common Equity Total Liabilities \& Equity Bob Smith, Inc. Statement of Cash Flows For the Year Ended December 31, 2017 \begin{tabular}{|l|l|} \hline Period Ending: & Dec-17 \\ \hline Cash flows from operating activities: & \\ \hline Net income (loss) \\ \hline Accounts Receiveable \\ \hline Inventory \\ \hline Other Current Assets & \\ \hline Accounts Payable \\ \hline Wages Payable \\ \hline Accrued Income Taxes & \\ \hline Net cash from Operations & \\ \hline Cash flows from investing activities: \\ \hline Sale of Goodwill \\ \hline PP\&E & \\ \hline Depreciaiton & \\ \hline Net cash from Investments & \\ \hline Cash flows from financing activities: \\ \hline Bank Notes & \\ \hline Dividends paid \\ \hline Tax \\ \hline Net cash used in financing activities & \\ \hline & \\ \hline Net increase (decrease) in cash \& cash equivalents \\ \hline Cash \& cash equivalents, start of period \\ \hline \end{tabular} XYZ Bank told Bob to increase cash to $70,000 from 2016 to 2017 . But cash increased from $16,566 in 2016 to just $33,411 in 2017 , well short of $70,000. In this assignment, you will review six select changes in the Balance Sheet accounts, highlighted in yellow, to bett er understand how these individual account changes impact overall cash flows. Bob Smith, Inc. Common-Size Balance Sheet \begin{tabular}{|r|r|r|r|l|} \hline \multicolumn{1}{|c|}{ Assets } & 2017 & % & 2016 & % \\ \hline Current Assets & & & \\ \hline Cash & & & \\ \hline Accounts Receivable & & & \\ \hline Inventory & & & \\ \hline Other Current Assets & & \\ \hline Total Current Assets & & \\ \hline \end{tabular} Fixed Assets PP\&E Goodwill other assets Total Fixed Assets Total Assets \begin{tabular}{|r|r|r|c|c|c|} \hline \multicolumn{1}{|c|}{ Liabilities \& Equity } & 2017 & 2016 \\ \hline Current Liabilities & & \\ \hline Accounts Payable & & \\ \hline Wages Payable & & \\ \hline Accrued Income Taxes & & \\ \hline Total Current Liabilities & & \\ \hline & & & \\ \hline Long Term Liabilities & & \\ \hline Long-Term Debt: Bank Notes & & \\ \hline Total Long Term Liabilities & & \\ \hline Total Liabilities & & \\ \hline \end{tabular} Equity Total Common Equity Total Liabilities \& Equity Bob Smith, Inc. Statement of Cash Flows For the Year Ended December 31, 2017 \begin{tabular}{|l|l|} \hline Period Ending: & Dec-17 \\ \hline Cash flows from operating activities: & \\ \hline Net income (loss) \\ \hline Accounts Receiveable \\ \hline Inventory \\ \hline Other Current Assets & \\ \hline Accounts Payable \\ \hline Wages Payable \\ \hline Accrued Income Taxes & \\ \hline Net cash from Operations & \\ \hline Cash flows from investing activities: \\ \hline Sale of Goodwill \\ \hline PP\&E & \\ \hline Depreciaiton & \\ \hline Net cash from Investments & \\ \hline Cash flows from financing activities: \\ \hline Bank Notes & \\ \hline Dividends paid \\ \hline Tax \\ \hline Net cash used in financing activities & \\ \hline & \\ \hline Net increase (decrease) in cash \& cash equivalents \\ \hline Cash \& cash equivalents, start of period \\ \hline \end{tabular}