$945,000 Net income.... Return on invested capital .... Cash flows from operating activities. Cash flows from investing activities . Cash flows from financing activities. 8% $(1,428,000) $600,000 $900,000 The company's Cash flows from operating activities section is as follows: $ 945,000 Net income.. Depreciation.... 210,000 Increase in accounts receivable (1,134,000) Increase in inventory...... Decrease in accounts payable.... (1,260,000) (189,000) Net cash flow from operating activities... $(1,428,000)
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
Tidewater Inc., a retailer, provided the following financial information for its most recent fiscal year:
Please see the attachment for details:
An examination of the financial statements revealed the following additional information:
• Revenues increased during the year as a result of an aggressive marketing campaign aimed at increasing the number of new “Tidewater Card” credit card customers. This is the company’s branded credit card, which can only be used at Tidewater stores. The credit card balances are accounts receivable on Tidewater’s balance sheet.
• Some suppliers have made their merchandise available at a deep discount. As a result, the company purchased large quantities of these goods in an attempt to improve the company’s profitability.
• In recent years, the company has struggled to pay its accounts payable on time. The company has improved on this during the past year and is nearly caught up on overdue payables balances.
• The company reported net losses in each of the two prior years.
Write a brief memo to your instructor evaluating the financial condition of
Tidewater Inc.
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