S11-4. (Learning Objectives 1, 2: Using cash-flow data to evaluate performance) Top managers of Tranquility Inns are reviewing company performance for 20X6. The Income Statement reports a 25% increase in net income over 20X5. However, most of the increase resulted from an exceptional gain from a lawsuit Tranquility Inns has last won against a competitor. The Balance Sheet shows a large increase in receivables. The cash flows statement, in summarized form, reports the following:

Requirement 1. Write a memo giving Tranquility Inns’s managers your assessment of 20X6 operations and your outlook for the future. Focus on the information content of the cash flow data.

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