The partner in charge of the Spencer Corporation audit comes by your desk and leaves a letter he has started to the CEO and a copy of tile statement of cash flows for tile year ended December 31, 2014. Because he must leave on an emergency, he asks you to finish the letter by explaining
(1) Tile difference between tile net income and cash flow amounts,
(2) The importance of operating cash flow,
(3) The sustainable source(s) of cash flow and
(4) Possible suggestions to improve the cash position.
James Spencer III, CEO
James Spencer Corporation
125 Bay Street
Toronto, ON
Dear Mr. Spencer:
I have good news and bad news about the financial statements for the year ended December 31, 2014. The good news is that net income of $100,000 is close to what we predicted in the strategic plan last year, indicating strong performance this year. The bad news is that the cash balance is seriously low. Enclosed is the Statement of Cash Flows, which best illustrates how both of these situations occurred at the same time...
Complete the letter to the CEO, including the four elements that the partner asked for.

  • CreatedSeptember 18, 2015
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