(Preparation of a Statement of Cash Flows, Analysis) The comparative balance sheets of Madrasah Corporation at the beginning and end of the year 2014 appear below.
Net income of $44,000 was reported, and dividends of $33,000 were paid in 2014. New equipment was purchased and none was sold.
(a) Prepare a statement of cash flows for the year 2014.
(b) Compute the current ratio (current assets ÷ current liabilities) as of January 1, 2014, and December 31, 2014, and compute free cash flow for the year 2014.
(c) In light of the analysis in (b), comment on Madrasah’s liquidity and financial flexibility.