Following are the income statements for Ocoee Oil Company for
Following are the income statements for Ocoee Oil Company for the year ended December 31, 2011, and the balance sheets at December 31, 2010 and 2011.


Requirements
1. Prepare a statement of cash flows for the year ended December 31, 2011, using (1) the direct method and (2) the indirect method.
2. Why is the statement of cash flows important to the company and to parties external to the company?
3. As a user, which format—direct or indirect—would you prefer and why?
4. Evaluate the way in which the company spent its cash during the year. Do you think the company is in a sound cash position?
5. Compute the firm’s free cashflow.
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