The comparative statements of financial position of Menachem NV at the beginning and end of the year 2022 appear below.

Net income of €34,000 was reported, and dividends of €23,000 were paid in 2022. New equipment was purchased and none was sold.

Instructions

a. Prepare a statement of cash flows for the year 2022.

b. Compute the current ratio (current assets ÷ current liabilities) as of January 1, 2022, and December 31, 2022, and compute free cash flow for the year 2022.

c. In light of the analysis in (b), comment on Menachem’s liquidity and financial flexibility.

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Menachem NV Statements of Financial Position Assets Dec. 31, 2022 Jan. 1, 2022 Inc./Dec. Equipment € 37,000 € 22,000 €15,000 Inc. Less: Accumulated depreciation-equipment (17,000) (11,000) 6,00o Inc. Accounts receivable 106,000 88,000 18,0oo Inc. Cash 22,000 13,000 9,000 Inc. Total €148,000 €112,000 Equity and Liabilities Share capital-ordinary €100,000 € 80,000 20,0oo Inc. Retained earnings 28,000 17,000 11,000 Inc. Accounts payable 20,000 15,000 5,000 Inc. Total €148,000 €112,000