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The cash flow data of Palomba Pizza Stores for the year ended December 31, 2001, are as follows:

Cash payment of dividends $ 35,000
Purchase of land 14,000
Cash payments for interest 10,000
Cash payments for salaries 45,000
Sale of equipment 38,000
Retirement of common stock 25,000
Purchase of equipment 30,000
Cash payments to suppliers 85,000
Cash collections from customers 250,000
Cash at beginning of year 50,000
a. Prepare a statement of cash flows for Palomba showing:

Net cash provided by operating activities.
Net cash provided by or used in investing activities.
Net cash provided by or used in financing activities.
b. Discuss, from an analyst's viewpoint, the purpose of classifying cash flows into the three categories listed above.

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Solution Summary

The purpose of classifying cash flows into the three categories is embedded.

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b. Discuss, from an analyst's viewpoint, the purpose of classifying cash flows into the three categories listed above.

Financial Statements is prepared to assist the stakeholders like investors, lenders, management etc so that they can assess the performance of the organization. . Cash flow statement is one of the important financial statements. It provides information regarding cash inflows and ...

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