Please analyze the given cash flow statement.
|Anderssen Inc. Statement of Cash Flow|
|For the month ended Dec 31,2016|
|Adjustment for depreciation expenses||500|
|Operating profit before working capital change||6,700|
|Increase in Accounts Payable||800|
|Increase in accounts receivable||(500)|
|Increase in merchadise inventory||(6,900)|
|Increase in accrued liability||100|
|Increase in tax payable||300|
|cash generated from operating activity||500||500|
|Cash flow from investing activities|
|Purchase of the equipment||(700)|
|Long Term investment||(300)|
|Cash generated from investing activities||(1,000)||(1,000)|
|Cash flow from Financing activities|
|Long term Debts||200|
|Issue of shares of common stock||2,600|
|cash generated from financing activities||2,800||2,800|
|Net increase in cash and cash equivalents||2,300|
|Operaing cash balance||1,000|
|Closing Cash balance||3,300|
Cash Flow Statement:
There are three primary financial statements in the annual report; they are the balance sheet, income statement and cash flow statement. The cash flow statement is a bridge between the balance sheet and the income statement. It also provides an overview of the sources and uses of company cash.
Answer and Explanation:
Based on the cash flow statement, this company had a decent amount of income at $6,200, however, the bulk of that cash is tied up in inventory purchases, which dragged down cash flow from operations to only $500.
The good news is that the company can support itself based on its own cash flow. However, it also made a $1,000 investment in capital investments, which forced it to seek external funding to cover the difference.
The company obtained $2,800 in external financing from debt and stock issuance. So, ultimately, the company has more than enough cash to cover itself.
Based on the cash flow statement, this appears to be a healthy company.
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from Accounting 101: Financial AccountingChapter 12 / Lesson 5