Question

Given the following information construct the statement of changes in financial position. What happened to the firm's liquidity position during the year? $16.7 51 13.6 55.1 10.8 15.2 56.0 Net income Decrease in accounts receivable Increase in accounts payable Sale of bonds Dividends Retirement of bonds Increase in inventory Depreciation expense Cost of goods sold Reduction in income taxes payable Sale of stock Purchase of plant and equipment Beginning cash Repurchase of stock TTI E Paragraph Anal 3 (12) %DOQOTETT. 5.0 91.0 1.1 5.6 E . T . - - -

Answer 1

Beginning Cash = 1.1
Let us list all the items that resulted in either a cash-inflow or a cash-outflow

Cash Inflow	Amount	Cash Outflow	Amount
Net Income	16.7	Dividends	14.8
Decrease in accounts receivable	6.1	Retirement of Bonds	10.8
Increase in accounts payable	13.6	Increase in Inventory	15.2
Sale of Bonds	55.1	Reduction in income tax payable	5
Sale of Stock	0.4	Repurchase of Stock	5.6
Depreciation expense	56	Purchase of Plant & Equipment	91
Total	147.9	Total	142.4

Though Depreciation Expense is a non-cash expense, it is mentioned in the above table on the inflow side because net income (16.7) is calculated after deducting the depreciation expense. Thus we need to add this back to get arrive at the figure for cash inflow.

Cost of goods sold (72.1) has not appeared in the above tables because this is already accounted for in the net income.
Net Income is calculated after deducting cost of goods sold from the revenues.

Cash Inflow = 147.9
Cash Outflow = 142.4
Net change in cash position = (147.9-142.4) = 5.5

Cash Position at year end = Beginning Cash + Net change in cash
= 1.1 + 5.5 = 6.6