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Free response · 3.8 The Cash Flow Statement
Exam-style concept-application task: apply the topic to a new business scenario. Suggested time 12–13 minutes.
FRQ — Business decision using financial criteria (3 points)
Juniper Landscaping had net income of $9,000 in June. Its June cash flows: customer payments received $41,000 (it billed $58,000); interest earned on savings $100; payments to employees $24,000; payments to suppliers $9,500; rent $2,500; interest paid $400; taxes $1,600; purchase of a used truck $18,000; loan principal repaid $1,200; owner's draw $4,000. Beginning cash was $22,000. July payroll of $25,000 is due on the 15th; most customers pay 45 days after billing.
(A) Calculate Juniper's total inflows, total outflows, net cash flow, and ending cash balance for June. 1 pt
(B) Explain why Juniper could report $9,000 of net income yet have negative cash flow of about $20,000, identifying at least TWO specific causes from the data. 1 pt
(C) Juniper cannot cover July payroll from $1,900 of cash. Recommend TWO actions consistent with the framework and explain how each improves the cash position. 1 pt