a. What is cash flow statement? why we use indirect method to prepare cash flow statement? Briefly explain operating, investing, and financing activities? (03) b. Prepare cash flow statement for Dec 31, 2008 using indirect method Corrigan Corporation: Balance Sheets as of December 31 2008 2007 Cash $ 72,000 $ 65,000 Accounts receivable 439,000 328,000 Inventories 894,000 813,000 Total current assets $1,405,000 $1,206,000 Land and building 238,000 271,000 Machinery 132,000 133,000 Other fixed assets 61,000 57,000 Total assets $1,836,000 $1,667,000 Accounts and notes payable Accrued liabilities Total current liabilities Long-term debt Common stock Retained earnings Total liabilities and equity $ 432,000 170,000 $ 602,000 404,290 575,000 254,710 $1,836,000 $ 409,500 162,000 $ 571,500 258,898 575,000 261,602 $1,667,000 orrigan Corporation: Income Statements for Years Ending December 31 2008 2007 Sales Cost of goods sold Gross operating profit General administrative and selling expenses Depreciation Miscellaneous Earnings before taxes (EBT) Taxes (40%) Net income $4,240,000 3,680,000 $ 560,000 236,320 159,000 134,000 $ 30,680 12,272 $ 18,408 $3,635,000 2,980,000 $ 655,000 213,550 154,500 127,000 $ 159,950 63,980 $ 95,970 Per-Share Data 2007 EPS Cash dividends Market price (average) P/E ratio Number of shares outstanding 2008 $0.80 $1.10 $12.34 15.4x 23,000 $4.17 $0.95 $23.57 5.65x 23,000