Author Question: In most states, if an employer has very few former employees who collect unemployment compensation, ... (Read 54 times)

abarnes · **on:** Jul 5, 2018

In most states, if an employer has very few former employees who collect unemployment compensation, the employer qualifies for a lower state unemployment tax rate.
a. True
b. False
Indicate whether the statement is true or false

Question 2

Tina is worried about the current financial state of Team Shirts, Inc Her latest statement of cash flows shows a net decrease in cash. Review and analyze the following summary statement.

Is Tina's business in trouble? Should she be worried? What should she do to improve the cash flow situation?

Team Shirts, Inc.
Statement of Cash Flows
For the Month of March 31, 2012

Cash from operating activities: 1,200
Cash used for investing activities: (1,650)
Cash used for financing activities: (2,000)
Net decrease in cash (2,450)

choc0chan · **Reply #1 on:** Jul 5, 2018

Answer to Question 1

True

Answer to Question 2

Cash from operating activities is positive. This means that Team Shirts is generating more in cash sales than it is spending to run the business. This is a sign of a healthy business. Cash used for investing is negative. This shows that Team Shirts is investing in the future by spending money on new equipment used to run the business. This is a sign that the business is growing. Cash used for financing means that Team Shirts has either paid off a debt or paid dividends to shareholders. Repayment of debt is a healthy business practice. Paying dividends to investors is also a good business practice.

This cash flow picture is normal for a new business. However, to conserve cash, Team Shirts should consider using credit to buy new equipment or postponing such purchases until the business has more cash. It could also forgo paying cash dividends until more cash is generated from operating activities.