Report determination of operating cash flows

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Reference no: EM131522409

Question: "Why can't we pay our shareholders a dividend?" shouts your new boss at Polar Opposites. "This income statement you prepared for me says we earned $5 million in our first year!" You recently prepared the financial statements below.

2091_Polar 1.png

Although net income was $5 million, cash flow from operating activities was a negative $5 million. This just didn't make any sense to your boss.

Required: Prepare a memo explaining how net income could be positive and operating cash flows negative. Include in your report a determination of operating cash flows of negative $5 million using the indirect method.

Reference no: EM131522409

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