Rising profit against falling operating cash, read across three years, is the subject of a composite trucking carrier's AC302 Unit 6 cash flow interpretation memo. Searches like "ac 302 unit 6 assignment example", "ac302 unit 6 sample" and "ac302 unit 6 example" land here.
What a finished AC302 Unit 6 cash flow interpretation memo looks like
Two pages under a memo heading: a summary paragraph, one table and four short sections. The table spans three years. Net income climbs from 2,100,000 to 2,900,000 while operating cash slides from 3,800,000 to 3,100,000, so operating cash per dollar of profit drops from 1.81 to 1.07. Spending on tractors rises from 2,600,000 to 4,200,000, turning free cash flow from 1,200,000 to negative 1,100,000. Two rows explain the drift: days sales outstanding lengthening from 41 to 57, and gains on retired tractors growing from 5.7 percent of net income to 18.6 percent. The sections cover operating quality, investing pace, the 2025 financing inflow from a terminal sale-leaseback that failed sale treatment, and what next year's statements would need to show.
How a AC302 Unit 6 example is structured
The memo leads with its conclusion, in three sentences, because the controller reads the summary first and may read nothing else. Every later claim points at a row of the table, which comes next. Operating quality opens the sections: the memo separates the part of the widening gap caused by slower collections from the part caused by gains that sit in net income while their cash is reported in investing. Investing pace comes second, measured against three years of operating cash, which cover capital spending only 1.02 times. The financing section explains why the terminal proceeds are reported as borrowing rather than as a sale. The last section lists the figures that would confirm or contradict the reading, including the receivables aging note, and the memo stops there without recommending any business decision.
The reading in three sentences
Profit and operating cash have moved apart for three years; slower collections and disposal gains explain most of the gap; borrowing, not operations, funded the 2025 fleet purchases.
Operating quality
Operating cash per dollar of net income fell from 1.81 to 1.07. Net income without the tractor gains grew far more slowly, from 1,980,000 to 2,360,000.
Investing pace
Three years of operating cash total 10,400,000 against capital spending of 10,200,000, a coverage of 1.02 that leaves almost nothing for debt service or dividends.
A sale that was borrowing
The terminal sale-leaseback failed sale treatment because the carrier kept a repurchase option, so its 2,000,000 of proceeds are reported in financing as debt.
Signs the reading was wrong
Days sales outstanding falling back toward 41, gains shrinking as the fleet settles, or operating cash regaining its old margin over profit in next year's statements.
Where marks go in AC302 Unit 6
A memo that reports three years of figures and never says what they mean together loses the interpretation marks, which carry most of the weight. The next loss is taking rising net income at face value: graders expect the gains on retired tractors to be removed before profit and cash are compared, since the proceeds behind them sit in investing. Calling negative free cash flow a sign of failure, without noting the fleet replacement the investing section documents, overreaches. Treating the sale-leaseback proceeds as an investing inflow, or as operating cash, misreads the failed-sale rule and costs heavily. Ratios given without their formula lose method points. Memos that drift into strategy, such as urging the carrier to sell routes, answer a question the unit did not ask and lose focus marks.
Get a AC302 Unit 6 example written to your instructions
Share whatever statements accompany the Unit 6 prompt, one year or several, plus the rubric and the reader the memo should address. The reading comes back within 24-48h, table and all, written as the accountant's view rather than as a business plan. A first custom sample is free of charge.
AC302 Unit 6 questions, answered
How is this memo different from a ratio analysis?
A ratio analysis computes measures; this memo reads the statement of cash flows as a set, asking how operating, investing and financing activity relate to each other and to net income. The AC302 sample uses only a few ratios, each chosen to test a specific claim about earnings quality or funding, and states each formula once. The interpretation, not the arithmetic, is what most Unit 6 rubrics weight.
Should the memo recommend what management should do?
Usually not in this course. The AC302 memo is an accountant's reading of what the statements show and what a reader should verify, written for a controller or a lender's file. Recommending route cuts or pricing changes moves into managerial territory the unit does not grade. If your prompt explicitly asks for a recommendation, the sample adds one short paragraph and keeps it tied to the reporting findings.
What if the section supplies only one year of statements?
Then the memo compares the three sections within that year and uses the comparative balance sheets for whatever trend two dates allow. Operating cash against net income, capital spending against depreciation, and financing against the investing outflow still say a great deal. The sample marks where a second year would strengthen a claim, instead of inventing figures to fill out the table.