S 1 2- 4 (L earn i ng Obj ec tiv es 1 , 2: U se cash -fl o w da t a t o e v al u a t e p er f or m a

S12-4 (Learning Objectives 1, 2: Use cash-flow data to evaluate performance) Top managers of Harmony Inns are reviewing company performance for 2012. The income statement reports a 20% increase in net income over 2011. However, most of the increase resulted from a gain on insurance proceeds from fire damage to a building. The balance sheet shows a large increase in receivables. The cash flows statement, in summarized form, reports the following:

 

 

 

Net cash used for operating activities ………………….

$(71,500)

Net cash provided by investing activities ……………..

43,000

Net cash provided by financing activities …………….

36,000

Increase  in cash  during  2012 ……………………………..

$   7,500

 

 

 

Write a memo giving Harmony Inns’ managers your assessment of 2012 operations and your outlook for the future. Focus on the information content of the cash flows data.

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