MADRASAH CORPORATION BALANCE SHEETS Assets Dec. 31, 2017 Cash $20,000 Accounts receivable $106,000 Equipment $39,000 Less: Accumulated depreciation - equipment $17,000 Total $148,000 Liabilities and Stockholders' Equity Accounts payable $20,000 Common stock $100,000 Retained earnings $28,000 Total $148,000
Jan. 1, 2017 $13,000 $88,000 $22,000 $11,000 $112,000
Inc./Dec. $7,000 Inc. $18,000 Inc. $17,000 Inc. $6,000 Inc.
$15,000 $80,000 $17,000 $112,000
$5,000 Inc. $20,000 Inc. $11,000 Inc.
Net income of $44,000 was reported, and dividends of $33,000 were paid in 2017. New equipment was purchased and none was sold.
Instructions:
a) Prepare a statement of cash flows for the year 2017.
b) Compute the current ratio (current assets + current liabilities) as of January 1, 2017, and December 31, 2017, and compute free cash flow for the year 2017.
c) In light of the analysis in (b), comment on Madrasah's liquidity and financial flexibility.