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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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The Statement of Cash Flows and Credit Analysis

June’s Camera Shop sells cameras and photographic supplies of all types to retail customers. 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 2019 and 2018, June’s accountant prepared the following statements of cash flows:

Chapter 11, Problem 60.1C, The Statement of Cash Flows and Credit Analysis Junes Camera Shop sells cameras and photographic

Required:

Does June’s Camera Shop appear to have grown (in terms of property, plant, and equipment) during the past 2 years?

To determine

Concept introduction:

Cash flow statement is also known as statement of cash flows. It shows inflow and outflow of cash and it is divided into three categories, i.e., operating, investing and financing activities. The investing cash flow shows the expansion of company in terms of assets, i.e., sale and purchase of those assets which are not intended to be sold in near future.

Whether camera Shop had grown in terms of assets in past two years.

Explanation

If a business has grown in terms of assets, it can be analyzed from cash flow statement by analyzing the cash flow from investing activities and comparing it with past years. If the cash flow is negative, i.e., outflow of cash, then it means that the business is moving towards a trend of expansion...

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