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The chief financial officer (CFO), Karl Richland, of Semtell Company in Cincinnati, Ohio, is asking...

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Accounting

The chief financial officer (CFO), Karl Richland, of Semtell Company in Cincinnati, Ohio, is asking for your advice. The CFO explains sales are increasing but there is a constant matter of not having enough cash to meet payroll or pay vendors within 30 days.

Checklist: Using the information contained in the companys cash flow statement, prepare an informational business letter to the CFO to explain:

  1. Why cash can go down even when sales are up.
  2. How increases in accounts receivables and inventory balances affect cash flows within a company.
  3. What effect increases or decreases in asset and liability accounts have on cash flow.
  4. How changes in accounts payable balances impact cash flows.
  5. Recommend a possible solution for the companys shortage of working capital.

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