$$Why can't we pay our shareholders a dividend?$$ shouts your new boss at Polar Opposites. $$This income statement you prepared for me says we earned $$5$ million in our first year!$$ You recently prepared the financial statements below.

Polar opposites income statement

Polar opposites balance sheet

Although net income was $$5$ million, cash flow from operating activities was a negative $$5$ million. This just didn't make any sense to your boss.

Required:

Prepare a memo explaining how net income could be positive and operating cash flows negative. Include in your report a determination of operating cash flows of negative $$5$ million using the indirect method.

Each learner is required to submit AT LEAST two $(2)$ posts: an initial post responding to the discussion prompt and at least one $(1)$ response post with your reaction to the ideas of other learners. Additional posts are encouraged. Make sure that your discussion posts and responses are posted in your section for the discussion. Your posts should include references to module readings and outside sources that support your comments. Please refer to the Course Schedule for due dates for initial and response posts. Posts made after the final deadline will receive zero credit.