The 2020 financial statements of Green Company include the following statement of cash flows:

Required

a. Did Green Company increase or decrease its current assets, other than cash, during 2020? Is this change consistent with an increase in sales, or a decrease in sales, during the period? Explain.

b. From an investor’s point of view, has Green Company become more risky or less risky in 2020? Explain.

c. Does Green Company appear to be expanding or contracting its operations? How can you tell? What other financial statement information might you examine to determine whether the company is expanding or contracting its operations?

d. Does Green Company appear to be able to maintain its productive capacity without additional financing? Explain.

Transcribed Image Text:

GREEN COMPANY Statement of Cash Flows For the year ended December 31, 2020 Operating: $ 644,000 Net income Adjustments to convert to cash: Depreciation expense 230,000 Gain on sale of operating assets (14,000) Change in current assets other than cash (120,000) Change in current liabilities 80,000 $ 820,000 Cash provided by operations Investing: Purchase of property, plant, and equipment $(1,200,000) Proceeds from the sale of property, plant, and equipment 400,000 Cash used for investing (800,000) GREEN COMPANY Statement of Cash Flows For the year ended December 31, 2020 Financing: Issuance of shares Retirement of bonds Dividends paid Cash used for financing Decrease in cash 1,000,000 (1,300,000) (250,000) (550,000) S (530,000)