Writing Assignment (Where is your statement of cash flows?)
You are a senior credit analyst for Far West Bank. The president of Moran Auto Sales has asked you for a loan of $2,000,000. Moran’s accountant has compiled and submitted a current balance sheet and income statement. Moran has had moderate income over the past 3 years but has found itself short of cash and therefore in need of the loan. After receiving the statements, you call Moran’s accountant and indicate that the financial statements are not complete; you need to see a statement of cash flows. The accountant argues,“ Everything on a statement of cash flows comes from the other two statements. Why make me do the additional work? Just analyze what we sent.” Your task now is to write a memo to the president of Moran Auto Sales convincing her that a statement of cash flows is essential for you to properly evaluate Moran’s loan application.