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. 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 is negative. Include in your report the calculation of operating cash flows of negative $5 million using the indirect method.
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. 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 is negative. Include in your report the calculation of operating cash flows of negative $5 million using the indirect method.
Fundamentals of Financial Management (MindTap Course List)
15th Edition
ISBN:9781337395250
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Eugene F. Brigham, Joel F. Houston
Chapter4: Analysis Of Financial Statements
Section: Chapter Questions
Problem 24P: Income Statement for Year Ended December 31, 2018 (Millions of Dollars) Net sales 795.0 Cost of...
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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.
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 is negative. Include in your report the calculation of operating cash flows of negative $5 million using the indirect method.
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