XYZ Company's comparative balance sheet and income statement for the most recent year are shown below:

XYZ Company

Comparative Balance Sheet

As of December 31

Ending Beginning

Assets Balance Balance

Cash 1,400,000 1,000,000

Accounts Receivable 2,100,000 1,500,000

Inventory 5,000,000 4,300,000

Prepaid Expenses 200,000 600,000

Plant and Equipment 19,000,000 14,000,000

Less: Accumulated Depreciation (6,500,000) (5,400,000)

Long-term Investments 7,000,000 9,000,000

Total Assets 28,200,000 25,000,000

Liabilities and Stockholders' Equity

Accounts Payable 2,600,000 2,500,000

Accrued Liabilities 1,000,000 1,200,000

Taxes Payable 4,900,000 4,900,000

Mortgage Payable 5,000,000 4,000,000

Common Stock 8,000,000 7,000,000

Retained Earnings 6,700,000 5,400,000

Total Liabilities and Stockholders' Equity 28,200,000 25,000,000

XYZ Company

Income Statement For the year ending,

December 31, 20xx

Sales 23,000,000

Less: Cost of Goods Sold (12,000,000)

Gross Margin 11,000,000

Less: Operating Expenses (7,000,000)

Operating Income 4,000,000

Gain on Sale of Long-term Investments 500,000

Income Before Taxes 4,500,000

Less: Income Taxes (1,400,000)

Net Income 3,100,000

Notes: Dividends of P18 Million were declared and paid during the year. The gain on sale of long-term investments was from the sale of investments for P25 Million in cash. These investments had an original cost of P20 Million. There were no retirements or disposals of plant or equipment during the year.

Required: 1. Prepare a cash flow statement using the indirect method of computing cash flow from operations.

2. Conduct a cash flow analysis.