(Learning Objectives 1, 2: Using cash-fl ow 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 fl ows 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 fl ow data.