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What conclusions can draw about the management

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The management of ABC Company felt proud of their accomplishments concerning cash flow for the end of the year because overall cash increased by $1,500,000. In the operating section, the company showed an increase in cash of $250,000 because of net income. However, because of increases in accounts receivable and inventory, the overall cash outflow from operating activities was $100,000.
In the investing section, purchases of long-term assets outweighed the sale of long-term assets which resulted in a cash outflow from investing activities of $500,000.

  • The company has a line-of-credit with the bank. During the year, the company drew on the line which resulted in cash inflow from financing activities of $2,100,000. The cash inflow from financing activities of $2,100,000 less the cash outflow from operating activities of $100,000 and less the cash out flow from investing activities resulted in the overall cash increase of $1,500,000.

Problem 1: Analyze the cash flows of ABC Company. What conclusions can you draw about the management of the company based on their cash flows?

Reference no: EM132936994

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