RE: FINANCIAL STATEMENTS CASE STUDY 2
PART ONE
In 20X1 the cash collected from accounts was calculated by adding the beginning
account of $625,000 to the net credit sales of $7,200,000 and then subtracting the ending account
receivables of $692,000. The total cash collected during this period was $7.133.00.
According to the income statement the production costs for sold merchandise amounted
to $4,320,000. This led to a profit of $2,880,000, for the boutique when compared to sales. The
balance sheet indicated a $113,000 increase in inventory due to merchandise purchases which
resulted in increased cash outflows. The accounts payable for the year decreased by $52,000
from the year suggesting repayment of past debts relative to new credit purchases.
A biblical verse from Romans 13;8 is referenced in relation to owing no one except love,
for each other fulfilling the law. Taking into account the cost of goods sold inventory increase
and accounts reduction suggests that supplier payments totaling $4,4850.00 were made by the
boutique.
The next section deals with questions 3, 4 and 5 which focus on determining the cash
flow generated from day, to day business operations money coming in from activities and funds
going out for investments over the course of the year. To figure out the cash paid in 20X1 to
suppliers for goods received but not yet paid for you can calculate it by adding up the sales
amount, the increase in stock levels and the decrease in payments to suppliers. With sales
amounting to $4,320,000 stock levels increasing by $113,000 and outstanding payments
decreasing by $52,000; this adds up to a cash payment of $4,4850. The cash flow statement
highlights changes in cash and convertible assets between consecutive financial periods while
providing reasons behind these shifts (Revsine, 2020). Determining the cash flow from activities
in 20X1 involves summing up net income figures along with depreciation costs and changes in
various financial elements like accounts receivable or payable. The process outlines how Berthas
Bridal Boutique computes its cash inflow using an approach starting with a base net income of
$5040; further adjustments are made to accommodate non cash transactions and shifts, in
working capital.The amount of depreciation that has accumulated has gone up by $25,000. It gets
added back, to the income because it doesn't involve actual cash. Any increases in assets, such as
the $67,000 rise in accounts and the $113,000 increase in inventory purchases are subtracted
because they represent cash that hasn't been received yet or has been spent. On the hand the
$20,000 decrease in expenses is added back since it indicates less cash paid upfront. Changes in
liabilities also impact operating cash flow; deducting the $52,000 decrease in accounts and
adding the $6,000 increase in accrued expenses results in a net cash inflow from operations of
$323,000.
Cash inflows during 20X1 from financing activities show how much cash was used for
investing activities to buy assets or securities within a period. This includes any cash gained from
selling these investments. It's about tracking decreases in cash due to investments made during a
period and increases when these investments are liquidated (Revisine, 2020). The total cash
RE: FINANCIAL STATEMENTS CASE STUDY 3
inflow during 20X1 from financing activities is negative at $937,000. Can be calculated by
combining property purchases, like plant equipment and long term investments.
The determination of cash inflows, from financing activities involves adding stock, long
term debt and cash dividends resulting in a total of $700,000. Moving on to the outflows from
investing activities in 20X1 the net cash flow from financing activities reflects changes in cash
due to transactions within the company. Specifically the company increased its stock issuance by
$100,000 and notes issuance by $750,000 while distributing $150,000 in dividends to
shareholders. These financing activities generated a cash inflow of $700,000. Despite
investments made during the period the company still managed to achieve an increase of $86,000
through operational and financing activities for fiscal year 20X1.
In conclusion a balance sheet provides an overview of an organizations assets, liabilities
and equities for a period. Understanding the cash flows within the balance sheet is crucial for
assessing factors such as creditworthiness, equity levels and liquidity of a company. Cash flow
from operating activities represents profit generating actions using either direct methods.
Investing activities involve investments in securities or assets while financing activities
encompass transactions related to business finance such, as debt issuance or repurchase.
Berthas Bridal Boutique assessed its cash flow. Made investments throughout the year. The main
expenses included distributing cash dividends resulting in a year end cash balance of $86,000, in
20X1.
RE: FINANCIAL STATEMENTS CASE STUDY 4
RESOURCES
Revsine, L., Collins, D., Johnson, W.B., Mittelstaedt, H.F., & Soffer, L. (2021). Financial
reporting and analysis (8th ed.). New York: McGraw-Hill Education. ISBN: 978-
1264097067
Wang, Z., Wang, Q., Lai, Y., & Liang, C. (2020, February). Drivers and outcomes of
supply chain finance adoption: An empirical investigation in China.
ScienceDirect. Retrieved from
https://www.sciencedirect.com/science/article/pii/S0925527319302634
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