Cindy and Robert Castillo founded the Castillo Products Company in 2008. The company manufactures components for personal decision assistant products and for other handheld electronic products. Year 2009 proved to be a test of the Castillo Products Company's ability to survive. However, sales increased rapidly in 2010, and the firm reported a net income after taxes of $75,000. Depreciation expenses were $40,000 in 2010. Following are the Castillo Products Company's balance sheets for 2009 and 2010.
2009 2010
Cash $ 50,000 $ 20,000
Accounts Receivable 200,000 280,000
Inventories 400,000 500,000
Total current assets 650,000 800,000
Gross fixed assets 450,000 540,000
Accumulated depreciation (100,000) (140,000)
Net fixed assets 350,000 400,000
Total assets 1,000,000 1,200,000
Accounts payable 130,000 160,000
Accruals 50,000 70,000
Bank loan 90,000 100,000
Total current liabilities 270,000 330,000
Long-term debt 300,000 400,000
Common stock ($0.01 par) 150,000 150,000
Additional paid-in-capital 200,000 200,000
Retained earnings 80,000 120,000
Total liabilities and equity 1,000,000 1,200,000
A.) Calculate Castillo's cash flow from operating activities for 2010.
B.) Calculate Castillo's cash flow from investing activities for 2010.
C.) Calculate Castillo's cash flow from financing activities for 2010.
D.) Prepare a formal statement of cash flows for 2010 and identify the major cash inflows and outflows that were generated by the Castillo Products Company.
E.) Use you calculation results from Parts A and B to determine whether Castillo was building or burning cash during 2010 and indicate the dollar amount of the cash build or burn.