Reporting and Interpreting Cash Flows from Operating Activities from an Analyst’s Perspective (Indirect Method) Capaz Company completed its income statement and balance sheet for 2012 and provided the following information:
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Income Statement for 2012 |
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|
Service revenue |
$53,000 |
|
|
Expenses |
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Salaries |
$41,000 |
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|
Depreciation |
7,000 |
|
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Amortization of copyrights |
200 |
72,375 |
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Other expenses |
9,700 |
$57,900 |
|
Net loss |
($4,900) |
|
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Partial Balance Sheet |
2012 |
2011 |
|
Accounts receivable |
$8,000 |
$15,000 |
|
Salaries payable |
15,000 |
1,000 |
|
Other accrued liabilities |
1,000 |
5,100 |
In addition, Capaz bought a small service machine for $5,000.
Required:
1. Present the operating activities section of the statement of cash flows for Capaz Company using the indirect method.
2. What were the major reasons that Capaz was able to report a net loss but positive cash flow from operations? Why are the reasons for the difference between cash flow from operations and net income important to financial analysts?