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Communication Tidewater Inc., a retailer, provided the following financial information for its most recent fiscal year: Net income $945,000 Return on invested capital 8% Cash flows from operating activities $(1,428,000) Cash flows from investing activities $600,000 Cash flows from financing activities $900,000 The company's Cash flows from operating activities section is as follows: Net income $ 945,000 Depreciation 210,000 Increase In accounts receivable (1,134,000) Increase in inventory (1,260,000) Decrease m accounts payable (189,000) Net cash flow from operating activities $(1,428,000) An examination of the financial statements revealed the following additional information: Ÿ 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. Ÿ 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. Ÿ 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. Ÿ 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.

BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094
BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094

Solutions

Chapter
Section
Chapter 16, Problem 16.3CP
Textbook Problem

Communication

Tidewater Inc., a retailer, provided the following financial information for its most recent fiscal year:

Net income $945,000
Return on invested capital 8%
Cash flows from operating activities $(1,428,000)
Cash flows from investing activities $600,000
Cash flows from financing activities $900,000

The company's Cash flows from operating activities section is as follows:

Net income $ 945,000
Depreciation 210,000
Increase In accounts receivable (1,134,000)
Increase in inventory (1,260,000)
Decrease m accounts payable (189,000)
Net cash flow from operating activities $(1,428,000)

An examination of the financial statements revealed the following additional information:

Ÿ 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.

Ÿ 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.

Ÿ 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.

Ÿ 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.

Expert Solution
To determine

Statement of cash flows:

Statement of cash flow is a financial statement that shows the cash and cash equivalents of a company for a particular period of time. It shows the net changes in cash, by reporting the sources and uses of cash as a result of operating, investing, and financing activities of a company.

Cash flows from investing activities:

Cash provided by or used in investing activities is a section of statement of cash flows. It includes the purchase or sale of equipment or land, or marketable securities, which is used for business operations.

Cash flows from financing activities:

Cash provided by or used in financing activities is a section of statement of cash flows. It includes raising cash from long-term debt or payment of long-term debt, which is used for business operations.

Cash flows from operating activities:

These refer to the cash received or cash paid in day-to-day operating activities of a company.  In this direct method, cash flow from operating activities is computed by using all cash receipts and cash payments during the year.

To Write: A brief memo to the instructor evaluating the financial condition of Incorporation T.

Explanation of Solution

Write a brief memo to the instructor evaluating the financial condition of Incorporation T.

Memo:

From,

XYZ

To,

The Instructor

Date: February 2, 2018.

Subject: Evaluating the financial condition of Incorporation T.

Dear Sir,

Incorporation T is a retailer which is facing net losses for the past two years. Though the incorporation has returned to profitability, there are many possible dangers which indicate that the future projections of the incorporation are highly uncertain. Such possible dangers are discussed as follows:

  • A new marketing campaign initiated by the incorporation by providing credit cards to the customers has earned many customers who are purchasing the goods on credit using the incorporation’s credit card. This has helped the company to return to profitability by earning more revenue. In this a danger is there for the incorporation that providing more credit cards will lead to more accounts receivables...

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Chapter 16 Solutions

Accounting
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Ch. 16 - Classifying cash flows Identify whether each of...Ch. 16 - Classifying cash flows Identify whether each of...Ch. 16 - Adjustments to net incomeindirect method Ripley...Ch. 16 - Adjustments to net incomeindirect method Ya Wen...Ch. 16 - Changes in current operating assets and...Ch. 16 - Changes in current operating assets and...Ch. 16 - Cash flows from operating activitiesindirect...Ch. 16 - Cash flows from operating activitiesindirect...Ch. 16 - Land transactions on the statement of cash flows...Ch. 16 - Land transactions on the statement of cash flows...Ch. 16 - Cash received from customersdirect method Sales...Ch. 16 - Cash received from customersdirect method Sales...Ch. 16 - Cash payments for merchandisedirect method The...Ch. 16 - Cash payments for merchandisedirect method The...Ch. 16 - Free cash flow McMahon Inc. reported the following...Ch. 16 - Free cash flow Dillin Inc. reported the following...Ch. 16 - Cash flows from operating activities On its income...Ch. 16 - Effect of transactions on cash flows State the...Ch. 16 - Classifying cash flows Identify the type of cash...Ch. 16 - Cash flows from operating activitiesindirect...Ch. 16 - Cash flows from operating activitiesindirect...Ch. 16 - Cash flows from operating activitiesindirect...Ch. 16 - Cash flows from operating activitiesindirect...Ch. 16 - Determining cash payments to stockholders The...Ch. 16 - Reporting changes in equipment on statement of...Ch. 16 - Reporting changes in equipment on statement of...Ch. 16 - Reporting land transactions on statement of cash...Ch. 16 - Reporting stockholders equity items on statement...Ch. 16 - Reporting land acquisition for cash and mortgage...Ch. 16 - Reporting issuance and retirement of longterm debt...Ch. 16 - Determining net income from net cash flow from...Ch. 16 - Cash flows from operating activitiesindirect...Ch. 16 - Statement of cash flowsindirect method The...Ch. 16 - Statement of cash flowsindirect method The...Ch. 16 - Cash flows from operating activitiesdirect method...Ch. 16 - Cash paid for merchandise purchases The cost of...Ch. 16 - Determining selected amounts for cash flows from...Ch. 16 - Cash flows from operating activitiesdirect method...Ch. 16 - Cash flows from operating activitiesdirect method....Ch. 16 - Free cash flow Sweeter Enterprises Inc. has cash...Ch. 16 - Free cash flow The financial statement for Nike,...Ch. 16 - Free cash flow Lovato Motors Inc. has cash flows...Ch. 16 - Statement of cash flowsindirect method The...Ch. 16 - Statement of cash flowsindirect method The...Ch. 16 - Statement of cash flowsindirect method The...Ch. 16 - Statement of cash flowsdirect method The...Ch. 16 - Statement of cash flowsdirect method applied to...Ch. 16 - Statement of cash flowsindirect method The...Ch. 16 - Statement of cash flowsindirect method The...Ch. 16 - Statement of cash flowsindirect method The...Ch. 16 - Statement of cash flowsdirect method The...Ch. 16 - Statement of cash flowsdirect method applied to PR...Ch. 16 - Ethics in Action Lucas Hunter, president of...Ch. 16 - Communication Tidewater Inc., a retailer, provided...Ch. 16 - Using the statement of cash flows You are...Ch. 16 - Dillip Lachgar is the president and majority...

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