Case: THE STATEMENT OF CASH FLOWS AND CREDIT ANALYSIS
June's Camera Shop sells cameras and photographic supplies of all types to retail cus- tomers. June's also repairs cameras and provides color prints. To compete with other camera departments, June's offers fast, efficient, and effective repairs and photographic processing. For fiscal 2009 and 2008, June's accountant prepared the follow- ing statements of cash flows:
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June's Camera Shop Statements of Cash Flows
For the Years Ended January 31, 2009 and 2008
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2009
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2008
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Cash flows from operating activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Increase in accounts receivable Increase in inventory
Increase in accounts payable Increase in wages payable Increase in income taxes payable Depreciation expense
Total adjustments
Net cash provided by operating activities
Cash flows from investing activities Purchase of long-term investments Purchase of equipment
Net cash used by investing activities
Cash flows from financing activities Principal payments on mortgage Payment of dividends
Net cash used by financing activities Net increase in cash and cash
equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
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$ 87,000
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$ 63,000
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$(17,000)
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$(12,000)
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(19,000)
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(11,000)
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15,000
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14,000
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11,000
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5,000
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6,000
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3,000
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|
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41,000
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37,000
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37,000
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36,000
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$124,000
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$ 99,000
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$(15,000)
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$(10,000)
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(45,000)
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(40,000)
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(60,000)
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(50,000)
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$(15,000)
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$(15,000)
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(12,000)
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(10,000)
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(27,000)
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(25,000)
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$ 37,000
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$ 24,000
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158,000
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134,000
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$195,000
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$158,000
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Required:
1. Does June's Camera Shop appear to have grown in size during the past two years?
2. June's president, June Smith, would like to open a second store. Smith believes that $225,000 is needed to equip the facility properly. The business has $100,000 of cash and liquid investments to apply toward the $225,000 required. Do the data in the 2009 and 2008 statements of cash flow suggest whether or not June's Camera Shop is likely to be able to secure a loan for the remaining $125,000 needed for the expansion?
3. How long should it take June's Camera Shop to pay back the $125,000?