Victoria Inc produces athletic wear The company s peak year was
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.
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