Can you help me respond to this post
A cash flow statement is critical because it helps managementanalyze the organization's finances. It helps determine whetherthere is enough cash flow to cover expenses such as payroll. It isalso beneficial to compare the operating activities expenses to thenet income. If the cash reported is higher than the net income,that is a good sign for the company. Non-cash items are added backto the profit in order to have a near actual expenses incurred. Wealso need to adjust the net income figure so it is not reduced bythe depreciation expense. This is why we add non-cash items back.The profit then ends up showing a smaller number. A company canhave a positive net income but a negative cash flow from operatingactivities because net income can be increased by non- cash itemsthat don't affect cash flow. Cash flow can be decreased by actualcash payouts that might not be considered an expense deduction fornet income. Some non-cash activities are mentioned in the statementof cash flow because they may have a significant impact on thecurrent and future performance in terms of revenue, profits, andthe ability of the organization to produce positive cash flows. Oneexample may be issuance of stock to retire a debt.
Can you help me respond to this post
A cash flow statement is critical because it helps managementanalyze the organization's finances. It helps determine whetherthere is enough cash flow to cover expenses such as payroll. It isalso beneficial to compare the operating activities expenses to thenet income. If the cash reported is higher than the net income,that is a good sign for the company. Non-cash items are added backto the profit in order to have a near actual expenses incurred. Wealso need to adjust the net income figure so it is not reduced bythe depreciation expense. This is why we add non-cash items back.The profit then ends up showing a smaller number. A company canhave a positive net income but a negative cash flow from operatingactivities because net income can be increased by non- cash itemsthat don't affect cash flow. Cash flow can be decreased by actualcash payouts that might not be considered an expense deduction fornet income. Some non-cash activities are mentioned in the statementof cash flow because they may have a significant impact on thecurrent and future performance in terms of revenue, profits, andthe ability of the organization to produce positive cash flows. Oneexample may be issuance of stock to retire a debt.
Related questions
[The following information applies to thequestions displayed below.]
| The followingfinancial statements and additional information are reported. |
| IKIBAN INC. Comparative Balance Sheets June 30, 2015 and 2014 | ||||||||
| 2015 | 2014 | |||||||
| Assets | ||||||||
| Cash | $ | 111,800 | $ | 69,700 | ||||
| Accounts receivable, net | 69,100 | 51,200 | ||||||
| Inventory | 65,900 | 96,200 | ||||||
| Prepaid expenses | 5,000 | 5,600 | ||||||
| Total current assets | 251,800 | 222,700 | ||||||
| Equipment | 125,800 | 115,000 | ||||||
| Accum. depreciationâEquipment | (28,700 | ) | (10,700 | ) | ||||
| Total assets | $ | 348,900 | $ | 327,000 | ||||
| Liabilities and Equity | ||||||||
| Accounts payable | $ | 26,500 | $ | 32,200 | ||||
| Wages payable | 7,900 | 16,900 | ||||||
| Income taxes payable | 2,800 | 3,600 | ||||||
| Total current liabilities | 37,200 | 52,700 | ||||||
| Notes payable (long term) | 50,000 | 77,000 | ||||||
| Total liabilities | 87,200 | 129,700 | ||||||
| Equity | ||||||||
| Common stock, $5 par value | 237,000 | 189,000 | ||||||
| Retained earnings | 24,700 | 8,300 | ||||||
| Total liabilities and equity | $ | 348,900 | $ | 327,000 | ||||
| IKIBAN INC. Income Statement For Year Ended June 30, 2015 | ||||||
| Sales | $ | 677,000 | ||||
| Costof goods sold | 411,000 | |||||
| Gross profit | 266,000 | |||||
| Operating expenses | ||||||
| Depreciation expense | $ | 58,600 | ||||
| Other expenses | 66,900 | |||||
| Total operating expenses | 125,500 | |||||
| 140,500 | ||||||
| Other gains (losses) | ||||||
| Gain on sale ofequipment | 2,700 | |||||
| Income before taxes | 143,200 | |||||
| Income taxes expense | 57,280 | |||||
| Netincome | $ | 85,920 | ||||
| Additional Information |
| a. | A $27,000 notepayable is retired at its $27,000 carrying (book) value in exchangefor cash. |
| b. | The only changesaffecting retained earnings are net income and cash dividendspaid. |
| c. | New equipment isacquired for $59,500 cash. |
| d. | Received cashfor the sale of equipment that had cost $48,700, yielding a $2,700gain. |
| e. | Prepaid Expensesand Wages Payable relate to Other Expenses on the incomestatement. |
| f. | All purchasesand sales of inventory are on credit. |
(1) Prepare a statement of cash flows for the year ended June30, 2015, using the indirect method. (Amounts to bededucted should be indicated with a minus sign.)
(2) Compute the company's cash flow on total assets ratio forits fiscal year 2015.
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