Victoria, Inc., produces athletic wear. The company’s peak year was 2008. Since then, both sales and profits have fallen. The following information is from the company’s 2011 annual report ($ in thousands):

During 2012, short-term loans of $9 million became due. Victoria paid off only $2.25 million and was able to extend the terms on the other $6.75 million. Accounts payable continued at a very low level in 2012, and the company maintained a large investment in corporate equity securities, enough to generate a $3,000,000 addition to net income and $900,000 of cash dividends in 2012. Victoria neither paid dividends nor issued stock or bonds in 2012. Its 2012 statement of cash flows was as follows:

* $3,000 of revenue from equity investments was included in income. $900 of this was received in the form of dividends, so $2,100 of the income was not received in cash.
1. Interpret Victoria’s statement of cash flows.
2. Describe any ethical issues relating to the strategy and financial disclosures of Victoria.

  • CreatedFebruary 20, 2015
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