Sunbeam Corporation manufactures and sells a variety of small household appliances, including toasters, food processors, and waffle grills. Exhibit 3.26 presents a statement of cash flows for Sunbeam for Year 5, Year 6, and Year 7. After experiencing decreased sales in Year 5, Sunbeam hired Albert Dunlap in Year 6 to turn the company around. Albert Dunlap, known in the industry as “Chainsaw Al,” had previously directed restructuring efforts at Scott Paper Company. The restructuring effort at Sunbeam generally involved firing employees and cutting costs aggressively. Most of these restructuring efforts took place during Year 6. The market expected significantly improved results in Year 7. Reported sales increased 18.7 percent between Year 6 and Year 7, and net income improved. However, subsequent revelations showed that almost half of the sales increase resulted from fraudulent early recognition of revenues in the fourth quarter of Year 7 that the firm should have recognized in the first quarter of Year 8. Growth in revenues for Years 5, 6, and 7 was _2.6 percent, _3.2 percent, and 18.7 percent, respectively.

Required
a. Using the information provided and the statement of cash flows for Year 5 in Exhibit 3.26, identify any signals before the turnaround effort that Sunbeam was experiencing operating difficulties and was in need of restructuring.
b. Using information in the statement of cash flows for Year 6, identify indicators of the turnaround efforts and any relations between cash flows that trouble you.
c. Using information in the statement of cash flows for Year 7, indicate any signals that the firm might have engaged in aggressive revenue recognition and had not yet fixed its general operating problems.