Top managers of Tranquility Inns are reviewing company performance for 2010. The income statement reports a 25% increase in net income over 2009. However, most of the increase resulted from an extraordinary gain on insurance proceeds from fire damage to a building.
The balance sheet shows a large increase in receivables. The cash flows statement, in summarized form, reports the following:
Net cash used for operating activities ...................... $(50,000)
Net cash provided by investing activities................. 30,000
Net cash provided by financing activities ................ 25,000
Increase in cash during 2010................................... $ 5,000

Requirement
1. Write a memo giving Tranquility Inn’s managers your assessment of 2010 operations and your outlook for the future. Focus on the information content of the cash flows data.