The 2014 comparative income statement and the 2014 comparative balance sheet of Golf America, Inc., have just been distributed at a meeting of the company’s board of directors. The members of the board of directors raise a fundamental question: Why is the cash balance so low? This question is especially hard to understand because 2014 showed record profits. As the controller of the company, you must answer the question.
Requirements
1. Prepare a statement of cash flows for 2014 in the format that best shows the relationship between net income and operating cash flow. The company sold no plant assets or longterm investments and issued no notes payable during 2014. There were no noncash investing and financing transactions during the year. Show all amounts in thousands.
2. Considering net income and the company’s cash flows during 2014, was it a good year or a bad year? Give your reasons.
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