In this exercise we will practice how to build the Statement of Cash Flows for the fiscal year end 2021. As discussed in the lecture, the Statement of Cash Flows can be built using information from the Income Statement and the Balance Sheet (we need the Balance Sheets of both 2020 and 2021 to calculate the changes). Here is step-by-step instruction on how to do it. First download the file below1. Cash flow from operating Step 1: Always start with net income from the income statement Step 2: Add back any non-cash item (which is depreciation expense)Step 3: Adjust for any changes in Current Assets and Current Liabilities item. Remember we need to consider the changes so you need to take the difference between the balance in 2020 and 2021. ? Any increase in asset item is a cash outflow - negative sign? Any decrease in asset item is cash inflow - positive sign? Any increase in liability item is cash inflow - positive sign?any decrease in liability item is a cash outflow - negative signCash flows from operating = sum of all items above. 2. Cash Flow from InvestingCash flow from investing solely comes from capital expenditure which is the change in Plant, Property and Equipment (PPE). Any increase in PPE means the firm bought some fixed assets > cash outflow > CAPEX has negative sign. Any decrease in PPE means the firm sold some fixed assets > cash inflow > CAPEX has positive sign. 3. Cash Flow from FinancingStep 1: debt issuance is the change in long term debt Step 2: stock issuance is the change in common stockKeep in mind that long term debt and common stock are both liability items, please advise the sign rule above to assign the correct sign for your calculation. Step 3: dividends come from the income statement. dividends are cash outflow (the company is paying their stockholders). Cash Flow from Financing = sun of all items above.

9TO Jxx A B C D E 1 Year 2020 2021 Income Statement 3 Net Sales 440,000 4 Cost of Goods Sold 110,000 Gross Profit 330,000 6 Operating Expenses 46,000 7 Depreciation Expense 40,000 8 EBIT 244,000 9 Interest Expense 8,400 10 EBT 235,600 11 Income Taxes 94,240 12 Net Income 141,360 181,360 13 Dividends 10,000 14 Retained Earnings 131,360 15 16 Balance Sheet 17 Cash 88,960 234,740 18 Accounts Receivable 80,000 88,000 19 Inventory 88,000 96,800 20 Total Current Assets 256,960 419,540 21 Property, Plant and Equipment 400,000 404,000 Total Assets 656,960 823,540 Accounts Payable 10,000 11,000 Accruals 10,000 10,000 28 Total Current Liabilities 20,000 21,000 29 30 Long Term Debt 120,000 154,220 31 32 Common Stock 400,000 400,000 33 Retained Earnings 116,960 248,320 34 Total Equity and Labllities 656,960 823,540 35 36 37 Statement of Cash Flows Net Income 39 Depreciation Change in Accounts Receivable 41 Change in Inventory Change in Accounts Payable Change in Accruals Cash Flows from Operating 46 CAPEX Cash Flows from Investing Debt Issuance 50 Equity Issuance 51 Dividends Cash Flow from Financing