The following are the comparative statements of cash flows for Italian Fine Leather Goods Incorporated (IFLG).

Required

a. Discuss the company’s ability to meet its non-operating needs for cash over these three years, and comment on the continuing nature of the major items that have appeared over this period.

b. Comment on the changes in IFLG’s accounts receivable, accounts payable, and inventory levels over these three years.

c. How did the company finance its repayment of long-term debt and its acquisition of property, plant, and equipment in 2020?

d. Describe how the company’s mix of long-term financing has changed during this three-year period, in terms of the proportion of debt versus equity. 

Transcribed Image Text:

ITALIAN FINE LEATHER GOODS INCORPORATED Statements of Cash Flows (in thousands) 2020 2019 2018 Operating activities Net income (loss) Adjustments for: Depreciation ex pense Loss on sale of equipment S(9,389) $(19,869) $1,916 5,489 3,210 4.308 3,561 663 327 Effect of changes in working capital items: Accounts receivable 119 (263) (680) Inventory 202 1,089 2,081 Prepaid ex penses 230 193 (53) Accounts payable (2,181) (1,752) (60) Interest paid (81) 107 (12) Interest received 21 133 244 Income taxes (paid) recovered 3,541 (183) (664) Net cash inflow from operations (9,319) (5,094) 6,660 Investing activities Acquisition of property and equipment (2,728) (4,972) (4,500) Acquisition of computer software (446) (1,107) (829) Net cash outflow for investing activities (3,174) (6,079) (5,329) Financing activities Increase in bank loan 5,284 Repayment of bank loan (2,900) Issuance of common shares 227 183 Repurchase of common shares (275) (11,400) Net cash inflow from financing activities 2,384 (48) (11,221) (11,217) Overall increase (decrease) in cash (10,109) (9,886) Cash position at beginning of year 13,225 24,446 34,332 Cash position at end of year $ 3,116 $13,225 $24,446