Income statement data (in thousands):
Net earnings (loss) $(6,106)
Losses on inventory write-down and fixed assets 379
Depreciation expense 799
Stock-based compensation expense (noncash) 830
Balance sheet data (in thousands):
Increase in accounts receivable 278
Decrease in inventory 1,252
Decrease in prepaid expenses 131
Decrease in accounts payable 472
a. Prepare the Cash Flows from Operating Activities section of the statement of cash flows, using the indirect method for Jones Soda Co.
b. Interpret your results in part (a).
Answer:
a.
JONES SODA CO.
Cash Flows from Operating Activities
(in thousands)
Cash flows from operating activities:
Net loss $(6,106)
Adjustments to reconcile net loss to net
cash flow from operating activities:
Depreciation 799
Loss on inventory write-down and fixed assets 379
Stock-based compensation expense (noncash) 830
Changes in current operating assets and
liabilities:
Increase in accounts receivable (278)
Decrease in inventory 1,252
Decrease in prepaid expenses 131
Decrease in accounts payable (472)
Net cash flow from operating activities $(3,465)
b. Jones Soda is struggling financially. The company has negative earnings and negative
net cash flow from operating activities. The company had grown quickly in prior years,
but the company has struggled in recent years. The increase in accounts receivable
is a positive sign, indicating an increase in sales. However, the dramatic decrease in
inventory and accounts payable suggests that the company is reducing the units sold and
reducing its size (i.e., going into a period of negative growth). This is not a healthy trend.