The following (summary) statement of cash flows has been provided by Sigma Designs, which specializes in diversified graphic systems, document imaging, and multimedia markets.

Sigmo Designs, Inc. Statement of Cash Flows (abbreviated) For the Years Ended January 31, 1995 and 1994

  Required

a. Explain and discuss each item that resulted in a change in cash for Sigma Designs.

b. Based on this information, evaluate Sigma's future prospects.

c. Did Sigma use the direct or indirect method? What evidence indicates which method Sigma used?

d. With reference to the data in this assignment, and in the preceding assignment (5-42), prepare a graph showing the trends in Sigma Designs’ cash flow from operations. On the same graph, show Sigma's net income (loss). Discuss these trends, along with your estimate of Sigma's future prospects.

e. Write a short memo to Sigma Designs’ controller regarding the effects of net losses on operating cash flows during the period 1992 through 1995. Evaluate the dramatic turnaround in Sigma's cash balances. What factors caused this reversal (1992-95)?

Transcribed Image Text:

Cash flows from operating activities: Net loss Summary of adjustments to net loss activities Net cash provided by (used for) operating activities Cash flows from investing activities: Purchases of marketable securities Sales of marketable securities Equipment additions Software development costs (capitalized) Other asset transactions Net cash provided by (used for) investing activities Cash flows from financing activities: Common stock sold Repayment of long-term debt Other financing transactions Net cash provided by (used for) financing activities Decrease in Cash and Equivalents 1995 $(1,000) 2,997 1,997 (20,547) 35,245 (625) (300) (273) 13,500 594 (47) (252) 295 $15,792 $(2,145) 2,731 586 (23,288) 32,155 (502) (1,200) 215 7,380 450 (40) (75) 335 $ 8,301 Cash flows from operating activities: Net loss Summary of adjustments to net loss activities Net cash provided by (used for) operating activities Cash flows from investing activities: Purchases of marketable securities Sales of marketable securities Equipment additions Software development costs (capitalized) Other asset transactions Net cash provided by (used for) investing activities Cash flows from financing activities: Common stock sold Repayment of long-term debt Other financing transactions Net cash provided by (used for) financing activities Decrease in Cash and Equivalents 1995 $(1,000) 2,997 1,997 (20,547) 35,245 (625) (300) (273) 13,500 594 (47) (252) 295 $15,792 $(2,145) 2,731 586 (23,288) 32,155 (502) (1,200) 215 7,380 450 (40) (75) 335 $ 8,301 Cash flows from operating activities: Net loss Summary of adjustments to net loss activities Net cash provided by (used for) operating activities Cash flows from investing activities: Purchases of marketable securities Sales of marketable securities Equipment additions Software development costs (capitalized) Other asset transactions Net cash provided by (used for) investing activities Cash flows from financing activities: Common stock sold Repayment of long-term debt Other financing transactions Net cash provided by (used for) financing activities Decrease in Cash and Equivalents 1995 $(1,000) 2,997 1,997 (20,547) 35,245 (625) (300) (273) 13,500 594 (47) (252) 295 $15,792 $(2,145) 2,731 586 (23,288) 32,155 (502) (1,200) 215 7,380 450 (40) (75) 335 $ 8,301 Cash flows from operating activities: Net loss Summary of adjustments to net loss activities Net cash provided by (used for) operating activities Cash flows from investing activities: Purchases of marketable securities Sales of marketable securities Equipment additions Software development costs (capitalized) Other asset transactions Net cash provided by (used for) investing activities Cash flows from financing activities: Common stock sold Repayment of long-term debt Other financing transactions Net cash provided by (used for) financing activities Decrease in Cash and Equivalents 1995 $(1,000) 2,997 1,997 (20,547) 35,245 (625) (300) (273) 13,500 594 (47) (252) 295 $15,792 $(2,145) 2,731 586 (23,288) 32,155 (502) (1,200) 215 7,380 450 (40) (75) 335 $ 8,301

Answer rating: 100% (QA)

a Explanation of Cash Flow Changes for Sigma Designs Net Loss Sigma Designs reported a net loss of 1000 in 1995 which is an improvement compared to a net loss of 2145 in 1994 This indicates better fin... View the full answer