KINGPIN COMPANY INCOME STATEMENT YEAR ENDED 12/31/20 Sales $300,000 Cost of Goods Sold -150,000 $150,000 Gross Profi OPERATING EXPENSES: Depreciation Expense 15,100 Other Expenses 92,000 TOTAL OPERATING EXPENSES 107,100 OPERATING INCOME $42,900 Other Gains (Losses) Gain on Sale of Equipment 1,200 INCOME BEFORE TAXES $44,100 Income Tax Expense -13,230 NET INCOME $30,870 ADDITIONAL INFORMATION ON YEAR 2020 TRANSACTIONS: (1) Sold equipment for $14,625. (2) Purchased equipment costing $36,000 paying $10,000 cash and signing a long-term Note Payable for $26,000. (3) Paid $13,500 to reduce the long-term Notes Payable (4) Borrowed $2,000 by signing a short-term Notes Payable (5) Declared and Paid Cash Dividends of $20,000 (6) Issued 1,000 shares of Common Stock for $12 per share.

Definition Definition Net amount of cash that an entity receives and expends over the course of a given period. For a business to continue operating, positive cash flows are required, and they are also necessary to produce value for investors. Investors in particular prefer to see growing cash flows even after capital expenditures have been paid for (which is known as free cash flow).