Chapter 10
The Statement of Cash Flow
533
Required
a) The company had a total decrease in cash during the year of $2,300. What is the primary
cause of this decrease in cash?
b) Are there any concerns with operating activities?
Analysis
In a cash flow budgeting meeting, the company’s CEO argued that, “we could have taken
a larger bank loan to finance our land purchase in 2016. In fact, instead of borrowing only
$120,000, we should have asked for $240,000. That would have put us into a better cash flow
situation.” Evaluate this comment from the CEO. How would a larger bank loan affect the cash
flow of Dawson Corporation?
