Question

In: Accounting

Analyze the statement of cash flows for Candy Corporation. a. Prepare a summary analysis of the...

Analyze the statement of cash flows for Candy Corporation.

a. Prepare a summary analysis of the statements of cash flows for Candy Corporation for 2015 and 2016.

1. Analyze the statement of cash flows for Candy Corporation.

a. Prepare a summary analysis of the statements of cash flows for Candy Corporation for 2015 and 2016.

b. Write an analysis of the statements of cash flows for Candy Corporation for 2015 and 2016. (Analyze operating cash flow, cash inflow, and cash outflow)

Candy Corporation

Statement of Cash Flows

For the Years Ended December 31, 2016 and 2015

2016 2015

Net income $1200 ($1500)

Adjustments to reconcile net income to net cash

provided by (used for) operating activities:

Depreciation 550 660

Changes in assets and liabilities:

Accounts receivable (1500) 2100

Inventory ( 220) (20)

Accounts payable 1300 (2500)

Accrued expenses (20) (330)

Net cash provided by (used for) operating activities $1310 ($1590)

Cash flows from investing activities:

Additions to property, plant & equipment (440) (300)

Cash flows from financing activities:

Proceeds from long-term debt 500 700

Repayments of long-term debt (400) ----

Payment of cash dividends (25) (45)

Net cash provided by financing activities 75 655

Net increase (decrease) in cash $945 ($1235)

Cash at beginning of period 1765 3000

Cash at end of period $2710 $1765

Expert Solution

Solution:-

a. Prepare a summary analysis of the statements of cash flows for Candy Corporation for 2015 and 2016:-

	2016	2015
Net cash provided by (used for) operating activities	$1,310	($1,590)
Cash flows from investing activities	(440)	(300)
Net cash provided by financing activities	75	655
Net increase (decrease) in cash	945	(1,235)
Cash at beginning of period	1,765	3,000
Cash at end of period	2,710	1,765

b.Write an analysis of the statements of cash flows for Candy Corporation for 2015 and 2016:-

The purpose of the cash flow statement is to show where an entities cash is being generated (cash inflows), and where its cash is being spent (cash outflows), over a specific period of time (usually quarterly and annually). It is important for analyzing the liquidity and long term solvency of a company.

The cash flow statement uses cash basis accounting instead of accrual basis accounting which is used for the balance sheet and income statement by most companies. This is important because a company may accrue accounting revenues but may not actually receive the cash. This could produce profits and taxes payable but not provide the resources to stay solvent.

Cash Flow from Operating Activities

The net amount of cash coming in or leaving from the day to day business operations of an entity is called Cash Flow From Operations. Basically it is the operating income plus non-cash items such as depreciation added. Since accounting profits are reduced by non-cash items (i.e. depreciation and amortization) they must be added back to accounting profits to calculate cash flow.

Cash flow from operations is an important measurement because it tells the analyst about the viability of an entities current business plan and operations. In the long run, cash flow from operations must be cash inflows in order for an entity to be solvent and provide for the normal outflows from investing and finance activities.

In given situation cash flow from Operating activities of Candy corporation increases in 2016 as compare to 2015 due to increase in sales (net income).

ekkarill92 answered 1 year ago

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