Part 1: You are given the following information for Barko Industries:
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Barko Industries
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Balance Sheet (Partial)
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Year 3
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Year 4
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Cash
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$70,000
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$9,640
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AR
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70,000
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85,000
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Inventories
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87,000
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84,000
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Accounts Payable
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48,000
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51,000
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Barko Industries
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Income Statement
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For the Year Ending December 31, Year 4
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Sales
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$560,000
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Operating Expenses
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$420,000
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Depreciation Expense
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46,000
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466,000
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Income Before Taxes
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$94,000
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Income Tax Expense
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$37,600
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Net Income
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$56,400
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- Barko Industries sold an asset and recorded a loss on the sale of $8.700. The sale price was $220,000 and the asset was originally purchased for $360,000.
- Dividends paid in Year 4 were $22, 460.
Required:
- Prepare a statement of cash flows for the year ending December 31, Year 4 using the indirect method.
- What conclusions could you arrive at regarding the cash position of the firm?
- What information was provided in the statement of cash flows that was not evident if just the balance sheet and the income statement were examined?
Part 2:
Examine the statement of cash flows for General Motors and Ford Motor Company for the most recent year. Address the following concerns:
- What are the two largest investing activities and financing activities for each firm?
- Compare and contrast the investing and financing activities of the two companies.
Evaluate the investing and financing strategies of the two firms? Provide a rationale for your opinion as to the effectiveness of each of the strategies