Cindy and Robert (Rob) Castillo founded the Castillo Products Company in 2018. The company manufactures components for personal decision assistant products and for other handheld electronic products. Year 2018 proved to be a test of the Castillo Products Company’s ability to survive. However, sales increased rapidly in 2019, and the firm reported a net income after taxes of $75,000. Depreciation expenses were $40,000 in 2019. Following are the Castillo Products Company’s balance sheets for 2018 and 2019.

A. Calculate Castillo’s cash flow from operating activities for 2019.

B. Calculate Castillo’s cash flow from investing activities for 2019.

C. Calculate Castillo’s cash flow from financing activities for 2019.

D. Prepare a formal statement of cash flows for 2019 and identify the major cash inflows and outflows that were generated by the Castillo Products Company.

E. Use your calculation results from Parts A and B to determine whether Castillo was building or burning cash during 2019 and indicate the dollar amount of the cash build or burn.

F. If Castillo had a net cash burn from operating and investing activities in 2019, divide the amount of burn by 12 to calculate an average monthly burn amount. If the 2020 monthly cash burn continues at the 2019 rate, indicate how long in months it will be before the firm runs out of cash if there are no changes in financing activities.

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CASTILLO PRODUCTS COMPANY BALANCE SHEET Cash Accounts receivable Inventories Total current assets Gross fixed assets Accumulated depreciation Net fixed assets Total assets Accounts payable Accruals Bank loan Total current liabilities long-term debt Common stock ($.01 par) Additional paid-in-capital Retained earnings Total liabilities and equity 2018 $ 50,000 200,000 400,000 650,000 450,000 -100,000 350,000 $1,000,000 $ 130,000 50,000 90,000 270,000 300,000 150,000 200,000 80,000 $1,000,000 2019 $ 20,000 280,000 500,000 800,000 540,000 -140,000 400,000 $1,200,000 $ 160,000 70,000 100,000 330,000 400,000 150,000 200,000 120,000 $1,200,000