Interpreting Financial Statements: Cash Flow Effects
The following statement of cash flows has been provided by Davo’s Surf Shop of Malibu, California:
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Davo’s Surf Shop Statement of Cash Flows For the Year Ended December 31, 2000 |
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Cash flows from operating activities |
$ 225,000 |
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Cash flows from investing activities: |
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Investment in Susie’s Swim Wear, Ltd. |
$ (215,000) |
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Purchase of marketable securities |
(550,000) |
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Proceeds from sale of building |
1,000,000 |
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Cash flows from financing activities: |
235,000 |
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Proceeds from debt issuance |
$ 600,000 |
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Gift from friends and family |
400,000 |
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Payment of dividends |
(200,000) |
800,000 |
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Net increase in cash |
$1,260,000 |
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Required
a. Explain and discuss each item that resulted in a change in cash for Davo’s Surf Shop.
b. Based on this limited information for only one year, evaluate Davo’s future prospects.
c. What other information would be helpful in evaluating Davo’s prospects?