Jonathan Beecher is the manager and one of three brothers who own the Mile High Sporting Goods Company in Denver, Colorado. Jonathan is pleased that sales were up last year and that his new, small company has been able to expand and open a second store in Denver. After reviewing the balance sheet, however, Jonathan is concerned that Cash shows a negative balance. He can't understand how his company can show net income, based on increased sales, yet have a negative Cash position. He is concerned about what his banker is going to say when they meet next month to discuss a loan for the company to expand to a third store. Jonathan provides the following financial information and asks for your help.

Required:
1. Using the direct method, compute the net cash flows from operations. Also determine net cash flows for investing and financing activities.
2. Interpretive Question: Is Mile High Sporting Goods in a good liquidity position? As Mr. Beecher's banker, would you loan him more money to fund the company'sexpansion?

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Mile High Sporting Goods Company Income Statement For the Year Ended December 31, 2012 Sales. S210,000 96,000 S114,000 Less cost of goods sold Gross margin. Operating expenses: Salary and wages Depreciation Other operating expenses Operating income. $41,000 6,800 14,200 62,000 $ 52,000 12,300 $ 39,700 Income taxes Net income Mile High Sporting Goods Company Comparative Balance Sheets As of December 31, 2012 and 2011 2012 2011 Assets Current assets: S (2,900) 3,800 60,000 $ 60,900 $ 4,300 3,100 51,000 $ 58,400 Cash Accounts receivable (net). Inventory. Total current assets. Other assets: Property, plant, and equipment Less accumulated depreciation $ 94,800 (19,200) $ 75,600 $136,500 S 46,300 (12,400) $ 33,900 $92,300 Total other assets Total assets..