Don Beecher, chief financial officer of Carvel Wireless, is responsible for the company€™s budgeting process. Beecher€™s staff is preparing the Carvel cash budget for 2011. A key input to the budgeting process is last year€™s statement of cash flows, which follows (amount in thousands):

Requirements
1. Prepare the Carvel Wireless cash budget for 2011. Date the budget simply 2011 and denote the beginning and ending cash balances as beginning and ending. Assume the company expects 2011 to be the same as 2010, but with the following changes:
a. In 2011, the company expects a 14% increase in collections from customers and a 25% increase in purchases of inventory.
b. There will be no sales of investments in 2011.
c. Carvel plans to issue no stock in 2011.
d. Carvel plans to end the year with a cash balance of $3,550.
2. Does the company€™s cash budget for 2011 suggest that Carvel is growing, holding steady, or decreasing insize?

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Carvel Wireless Statement of Cash Flows 2010 (In thousands) Cash Flows from Operating Activities Collections from customers Interest received Purchases of inventory $62,000 700 (47,000) (13,700) 2,000 Net cash provided by operating activities Cash Flows from Investing Activities Purchases of equipment Purchases of investments Sales of investments (4,100) (300) 900 (3,500) ... Net cash used for investing activities Cash Flows from Financing Activities Payment of long-term debt Issuance of stock Payment of cash dividends (500) 1,500 (400) 600 Net cash provided by financing activities Cash Increase (decrease) in C Cash, beginning of y Cash, end of year (900) 2,800 1,900