You are part of a group of students analyzing the financial statements of a public company as part of a class project. At a team meeting, one of your group members makes the following statement:
“The company’s cash flows from operating activities were $2.8 million for the year. Because these profits belong to shareholders, the company would normally distribute dividends of $2.8 million to them in the next year.”

Required

Identify where your classmate’s analysis is flawed and explain why this is the case.