Why is the cash balance so low? This question is especially hard to understand because 2014 showed...

The 2014 comparative income statement and the 2014 comparative balance sheet of Golf America, Inc., have just been distributed at a meeting of the company’s board of directors. The members of the board of directors raise a fundamental question: Why is the cash balance so low? This question is especially hard to understand because 2014 showed record profits. As the controller of the company, you must answer the question.

GOLF AMERICA, INC. Comparative Income Statement Years Ended December 31, 2014 and 2013
	2014	2013
Revenues and gains:
Sales revenue	$444	$310
Gain on sale of equipment (sale price, $33)	0	18
Total revenues and gains	$444	$328
Expenses and losses:
Cost of goods sold	$221	$162
Salary expense	48	28
Depreciation expense	46	22
Interest expense	13	20
Amortization expense on patent	11	11
Loss on sale of land (sale price, $61)	0	35
Total expenses and losses	$339	$278
Net income	$105	$ 50

 

GOLF AMERICA, INC. Comparative Balance Sheet December 31, 2014 and 2013
	2014	2013
Assets
Cash	$ 25	$ 63
Accounts receivable, net	72	61
Inventories	194	181
Long-term investments	31	0
Property, plant, and equipment, net	125	61
Patents	177	188
Totals	$624	$554
Liabilities and Stockholders’ Equity
Accounts payable	$ 63	$ 56
Accrued liabilities	12	17
Notes payable, long-term	179	264
Total liabilities	$254	$337
Common stock	$149	$ 61
Retained earnings	221	156
Total stockholders’ equity	$370	$217
Total liabilities and stockholders’ equity	$624	$554

Requirements

1. Prepare a statement of cash flows for 2014 in the format that best shows the relationship between net income and operating cash flow. The company sold no plant assets or longterm investments and issued no notes payable during 2014. There were no noncash investing and financing transactions during the year. Show all amounts in thousands.

2. Considering net income and the company’s cash flows during 2014, was it a good year or a bad year? Give your reasons.