Because of the dramatic growth at East Coast Yachts, Larissa decided that the company should be reorganized as a corporation (see our Chapter
1 Closing Case for more detail). Time has passed and, today, the company is publicly traded under the ticker symbol €œECY€.
Dan Ervin was recently hired by East Coast Yachts to assist the company with its short-term financial planning and also to evaluate the company€™s financial performance. Dan graduated from college five years ago with a finance degree,
and he has been employed in the treasury department of a Fortune 500 company since then.
The company€™s past growth has been somewhat hectic, in part due to poor planning. In anticipation of future growth, Larissa has asked Dan to analyze the company€™s cash flows. The company€™s financial statements are prepared by an outside auditor. Nearby you will find the most recent income statement and the balance sheets for the past two years.
Larissa has also provided the following information. During the year, the company raised $40 million in new long-term debt and retired $22.6 million in long-term debt. The company also sold $24.2 million in new stock and repurchased $35.64 million. The company purchased $59.5 million in fixed assets, and sold $6,718,200 in fixed assets.

EAST COAST YACHTS
2017 Income Statement
Sales...................................................................$611,582,000
Cost of goods sold..............................................431,006,000
Selling, general, and administrative...................73,085,700
Depreciation..........................................................19,958,400

EBIT......................................................................$ 87,531,900
Interest expense....................................................11,000,900
EBT........................................................................$ 76,531,000
Taxes........................................................................30,612,400
Net income...........................................................$ 45,918,600
Dividends.................................................................17,374,500
Retained earnings................................................$ 28,544,100

Larissa has asked Dan to prepare the financial statement of cash flows and the accounting statement of cash flows. She has also asked you to answer the following questions:
1. How would you describe East Coast Yachts€™ cash flows?
2. Which cash flows statement more accurately describes the cash flows at the company?
3. In light of your previous answers, comment on Larissa€™s expansion plans.

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EAST COAST YACHTS Balance Sheet 2016 2017 2016 2017 Current assets Current liabilities $ 10,644,500 $ 43,482,200 $ 11,119,700 $ 44,461,550 Cash and equivalents Accounts payable 18,924,800 18,681,500 6,123,200 Accounts receivable Accrued expenses 5,417,300 $ 48,899,500 $ 50,584,750 Inventories 17,090,100 20,149,650 Total current liabilities Other 1,097,700 1,172,200 $ 51,123,050 $ 47,757,100 Total current assets $151,860,000 $169,260,000 $169,260,000 Long-term debt $151,860,000 Fixed assets Total long-term liabilities $404,727,800 $457,509,600 Property, plant, and equipment 93,887,500) $310,840,300 Less accumulated depreciation (113,845,900) $343,663,700 Stockholders' equity 6,772,000 Net property, plant, and equipment Intangible assets and others $ 1,970,000 $ 1,970,000 6,772,000 Preferred stock $317,612,300 $350,435,700 Total fixed assets Common stock 29,700,000 37,583,700 11,800,000 28,116,300 Capital surplus Accumulated retained eamings 133,019,900 161,564,000 (47,520,000) $181,714,000 Less treasury stock (11,880,000) $164,609,900 Total equity Total liabilities and shareholders' equity $365,369,400 $365,369,400 $401,558,750 $ 401,558,750 Total assets