Question

ZZ Tire Company started as retail installer of tires on cars 10 years ago. They now have 400 retail stores, installing about 10,000 tires per store per year and selling a total of 4 million tires. 5 years ago, they decided to start manufacturing their own tires to sell in their retail locations. They now have 4 manufacturing plants, making 2 million tires a year. They made a profit of $170 million dollars. On average, the make $50 a tire on the tires they manufacture and $35 on the tires from other manufacturers. Their current growth rate is 12% a year, and they are only located in the 10 southeaster states. Just by looking at this information, how should their cash flows be characterized on their statement of cash flows. Look through the different types of categorizations of cash flows and define each. Then analyze to see which categorization fits the best here.

Answer 1

The three classifications on the announcement of incomes are:

1. Incomes from working exercises:

• These detail the incomes from working exercises of the organization for example customary everyday exercises as a rule containing the center business exchanges. Models, incomes from debt claims, payables and so on.

2. Incomes from contributing exercises:

• The incomes related with the speculations of the organization be it in fixed resources, acquisitions of stock and such.
• It incorporates both buy and offer of the benefits.

3. Incomes from financing exercises:

• The incomes identified with the financing wellsprings of the organization I..e the sources from which the organization fund-raises to support its activities over the long haul.

Now let we take,

• Having 400 retail stores - investment activities
• 4 manufacturing facilities - investment activities
• profit of $170 million - operating activities
• growth rate of 12% - financing activities
• average earnings from each tire - operating activities