Case-2 CASE STUDY ANAYSIS ACCT 412: FINANCIAL STATEMENT ANALYSIS JEM Company's comparative balance sheets for 2004 and 2005 appear below. JEM Company Comparative Balance Sheets December 31, 2001 and 2005 2005 2004 Assets $ 30,500 $ 10.000 64.500 51.000 100,000 115,000 55.000 30,000 (21.500) (14.000) $228,500 $192,000 Cash and cash equivalents Accounts receivable (net) Inventory Equipment Accumulated depreciation equipment Total assets Liabilities and stockholders' equity Accounts payable Long-term notes payable Capital stock Retained earnings Total liabilities and stockholder' cquity $ 52.500 70.000 60,000 46,000 $228,500 $ 46,000 30,000 60,000 36,000 $192,000 The following additional information is available: net income for the year 2005 (as reported on the income statement) was $90,000; dividends of $60,000 were declared and paid; and equipment that cost $8,000 and had a book value of S1,000 was sold during the year for $2,500. Based on the information provided answer the following: a. Prepare the statement of cash flow using direct method and discuss the total changes in cash 2005. b. Discuss, from an analyst's viewpoint, the results and effects of various events in cash flow statement by Operational cash flow ii. Investment cash flow iii. Financial cash flow c. Compute and interpret liquidity ratios