Question

1. Given the following information:

Activity	Amount, K
Cash from short-term borrowing	800,000
Cash from issuing capital stock	2,000,000
Cash from issuing bonds payable	10,000,000
Dividends paid	1,000,000
Payments to settle short-term debts	5,000,000
Cash from sales of plant assets	3,000,000
Loans made to borrowers	500,000
Purchases of marketable securities	6,000,000
Collections on loans	300,000
Purchases of plant assets	10,000,000
Cash paid to suppliers and employees	20,000,000
Cash received from customers	30,000,000
Income taxes paid	1,600,000
Interest and dividends received	500,000
Interest paid	1,000,000
Proceeds from sales of marketable securities	2,000,000

1. Produce a cash flow statement for the company.                                                
2. What does the statement tell us about the financial state of this company? Explain.

Answer 1

Please find attached sheets for detailed calculations,

Explanation on Company's Postion with respect to cash-

Net cash from operation is enough to genrate the cash which is goods.

Net cash from investing activities is negative which is good but there is a concern company is heavily investing in the marketables securities which is riskier option to be in. The company always parks it's safest money in this asset.

Hence the company is not seeming confident in it's operation in my opinion.

Cash from financing activities is good but the finance raised from this activities must be used to genrate the cash from operating activites and not from investing amount in riskier asset.

Overall company is in good space except company shuld be more focused to expand it's business operations.

Please comment for any addtional explanation.

Thanks,