An indirect-method cash flow statement for a fast-growing electronics assembler, plus two pages reading it for an executive, make up this finished GB518 Unit 8 cash flow statement exercise. Searches like "gb 518 unit 8 assignment example", "gb518 unit 8 sample" and "gb518 unit 8 example" land here.
What a finished GB518 Unit 8 cash flow statement exercise looks like
Comparative balance sheets and a current income statement appear first as given data, followed by a worksheet computing the change in each balance sheet account. The statement itself is formatted conventionally: operating activities starting from net income, adding back depreciation and a loss on an equipment sale, then adjusting for increases in receivables and inventory and an increase in payables; investing activities showing equipment purchased and the sale proceeds; financing activities showing new borrowing and dividends paid. Net change in cash ties to the balance sheets. A short supplemental schedule computes free cash flow. The interpretation section, about two pages, is written as a memo to the chief executive and answers the three questions its prompt poses about earnings quality, growth funding and next year.
How a GB518 Unit 8 example is structured
Preparation and interpretation are kept distinct so a grader can score each. The change worksheet comes first because every operating adjustment and most investing and financing lines are read off it; showing it lets a reader trace any figure. Within operating activities the order follows convention, noncash items first, then working capital changes, each with its sign explained where it might surprise, such as an increase in receivables reducing cash. The equipment sale is split correctly, the loss added back in operating and the full proceeds shown in investing. The memo then leads with the headline: operating cash was less than half of net income, and the gap sits almost entirely in receivables and inventory built to support growth. It closes by estimating how much outside financing next year's plan would need.
A worksheet of changes
Every balance sheet account appears with its beginning balance, ending balance and change, labeled as a source or use of cash. The statement is assembled from this page.
Signs that look backward
An increase in receivables is subtracted and an increase in payables added. A short note beside each explains why, since this is where readers new to the statement most often stall.
The equipment sale, split
The loss on sale is added back in operating activities, and the full cash proceeds appear under investing. Recording the book value instead of the proceeds is flagged as a common trap.
Profit that did not become cash
The memo sets net income beside operating cash flow and attributes the gap line by line. Receivables rose faster than sales, which suggests collection terms loosened during the growth push.
Can growth pay for itself?
Free cash flow was negative after equipment spending. The memo estimates the borrowing next year's plan would require and suggests tightening credit terms before adding capacity.
Where marks go in GB518 Unit 8
Sign errors in working capital adjustments are the most frequent computation loss, and one reversed sign usually prevents the statement from tying to the change in cash. Placing items in the wrong section costs next: interest paid moved to financing when US rules keep it in operating, dividends shown under operating, or the equipment sale's book value used instead of proceeds. A statement that does not reconcile to the balance sheet cash change signals an error somewhere and is marked accordingly. For an MBA reader the interpretation often carries as much weight as the preparation, and a correct statement with a one-paragraph summary tends to earn little of that credit. Interpretations that restate the line items rather than explaining the gap between income and cash miss what the prompt usually asks.
Get a GB518 Unit 8 example written to your instructions
Working from the comparative statements that came with Unit 8 of your GB518 course, plus the prompt and rubric, a custom exercise prepares the statement and writes the interpretation, with the gap between income and cash explained. Expect it in 24 to 48 hours. Whatever company the prompt uses, the first sample is free.
GB518 Unit 8 questions, answered
Why does the indirect method start with net income?
Because it reconciles accrual profit to cash. Starting from net income and adjusting for noncash items and working capital changes shows exactly why the two figures differ, which is the question managers and lenders care about. The direct method lists cash receipts and payments instead. Most GB518 prompts use the indirect method, and US companies overwhelmingly report that way.
How can a profitable company run short of cash?
Growth usually explains it. Selling more on credit raises receivables, and building stock for higher sales raises inventory, both of which consume cash before any is collected. Heavy equipment purchases add to the drain. The assembler example traces a profitable year's cash decline to those lines, which is the reading the interpretation exercise is designed to test.
What counts as free cash flow in this exercise?
The most common definition is operating cash flow minus capital expenditures, the cash left after maintaining and expanding productive assets. Some prompts subtract dividends too. The example states the definition it uses in one line before calculating, because different sources vary and graders want to see which formula was applied to the figures.