Reference no: EM131123007
Cindy and Robert (Rob) Castillo founded the Castillo Products Company in 2008. The company manufactures components for personal decision assistant products and for other handheld electronic products. Year 2009 proved to be a test of the Castillo Products Company's ability to survive. However, sales increased rapidly in 2010, and the firm reported a net income after taxes of $75,000. Depreciation expenses were $40,000 in 2010. Following are the Castillo Products Company's balance sheets for 2009 and 2010.
A. Calculate Castillo's cash flow from operating activities for 2010.
B. Calculate Castillo's cash flow from investing activities for 2010.
C. Calculate Castillo's cash flow from financing activities for 2010.
D. Prepare a formal statement of cash flows for 2010 and identify the major cash inflows and outflows that were generated by the Castillo Products Company.
E. Use your calculation results from Parts A and B to determine whether Castillo was building or burning cash during 2010 and indicate the dollar amount of the cash build or burn.
F. If Castillo had a net cash burn from operating and investing activities in 2010, divide the amount of burn by 12 to calculate an average monthly burn amount.
If the 2011 monthly cash burn continues at the 2010 rate, indicate how long in months it will be before the firm runs out of cash if there are no changes in financingactivities.
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