The operating activities section of Johann Manufacturing Ltd.’s statement of cash flows is shown below. In answering the questions after the statement, assume that the net cash flows from Johann’s investing and financing activities were zero; that is, that the cash inflows within the investing and financing sections were offset by the cash outflows.
Use the preceding information to answer the following questions. If a question cannot be answered based on the information given, indicate why.
a. Have the accounts receivable increased or decreased this year? Explain briefly.
b. Has the inventory increased or decreased this year? Explain how this affects cash.
c. Did the amount of expenses prepaid by the company increase or decrease during the year? Does this help or hurt its cash position? Explain briefly.
d. Compared with last year, does the company seem to be relying more heavily, or less heavily, on trade credit to finance its activities? Explain briefly.
e. If you were a potential creditor, would you see any warning signs in the statement of cash flows that you would want to investigate before lending money to Johann Manufacturing? Explain briefly.
f. Johann Manufacturing has $2 million of bonds maturing in January 2017. Do you think the company will be able to meet its obligation to pay off the bonds, without obtaining additional long-term financing?
Explain briefly.

  • CreatedJune 11, 2015
  • Files Included
Post your question