Week 5 Checkpoint Little Bit, Inc.

. Statement of Cash Flows For Year Ended December 31, 2009 Operating Activities Net income Noncash expenses included in net income: Depreciation Deferred income taxes Cash provided by (used for) current assets and liabilities Accounts receivable Inventory Prepaid expenses Accounts payable Accrued salaries payable Net cash used by operating activities Investing Activities Purchase of plant and equipment Purchase of long-term investments Net cash used by investing activities Financing activities Additions to long-term debt Sale of common stock Net cash provided by financing activities Increase in cash Analysis

5,500 18,000 500 (6,500) (8,500) (4,000) 2,000 (16,000) 9,000 ) (6,000) (1,000) 7,000 )

($

($

17,000 15,000 $ 32,000 $ 16,000

Inflows
Long-term debt Sale of common stock Total

$ 17,000 15,000 32,000

% 53 47 100

Outflows
Operating activities Purchase of property and equipment Purchase of long-term investments Total 9,000 6,000 1,000 56 38 6 100

16,000

Little Bit, Inc., had a growth primarily in the areas of inventory, receivable and prepaid expenses, along with payments of accrued liabilities, which caused the company to fail to generate cash from operating activities. (Fraser & Ormiston, 2007) Due to the company capital assets increase, the company may be expanding. The long term debt and common stocks are supporting the expansion, primarily. The long term debt is not only being used for acquiring the plats needs and the equipment needed to run the expansion, but to cover the loss of cash flow from operations. A company would not generally match financing current assets with long term debt maturities.

Little Bit, Inc. needs to create cash flow for the potential to decrease the debt, maybe by calculating the development in the areas of inventory and receivable.

Reference: Fraser, L. M., & Ormiston, A. (2007). Understanding financial statements (8th ed.). Upper Saddle River, NJ: Pearson/Prentice Hall