Use the following statement of cash flows for the Matlock Company to answer the required questions:

Requirements
1. How did Matlock Company use the majority of its cash during 2010?
2. What information does this give you about Matlock Company?
3. What was Matlock Company€™s major source of cash during 2010?
4. Is this an appropriate source of cash for the long run? Explain.
5. Calculate Matlock€™s free cash flow for2010.

Transcribed Image Text:

Matlock Company Statement of Cash Flows For the Year Ended December 31, 2010 (amounts in thousands) Cash flows from operating activities: Net income Depreciation expense Decrease in accounts receivable $1,500 . . 210 (70) (10) 150 Increase in prepaid rent . Net cash provided by operating activities.$2,100 Cash flows from investing activities: Purchase of equipment : (1,000) Proceeds from sale of old equipment Net cash used by investing activities Cash flows from financing activities: . -. (800) Repayment of long-term mortgage s(1,350) Proceeds from sale of common stock Payment of cash dividends Net cash used by financing activities... . Net increase in cash during 2010 Cash balance, January 1, 2010 Cash balance, December 31, 2010 ..(1,050) 250 696