| Course | FAM-5400 Finance and Accounting for Managers |
|---|---|
| Module | Module 1 |
| Paper type | Written assignment 1: fundamental financial statements |
| Length | About 601 words, 5 pages |
| Format | APA 7 student paper |
| School | Thomas Edison State University |
| Program | Master of Science in Management |
| Updated | October 2026 |
Free sample paper for FAM 5400 Module 1
Profitable and Short of Cash: Reading Millville Scientific Glass's 2025 Statements
Student Name
Master of Science in Management, Thomas Edison State University
FAM-5400: Finance and Accounting for Managers
Mentor Name
Month Day, Year
Profitable and Short of Cash: Reading Millville Scientific Glass's 2025 Statements
The Income Statement: Is the Company Profitable?
On an accrual basis, Millville's income statement books revenue as it is earned and costs as they are incurred, whatever the timing of cash. Sales grew about 13 percent from $34.1 million, and the company kept a gross margin of 34 percent and an operating margin of 9.4 percent. By this measure, 2025 was a good year. Keown et al. (2020) caution, however, that accrual profit and cash are different things, and the other two statements show how different. Libby et al. (2020) show how accrual entries let Millville report a profit while its bank balance shrinks.
| Income statement, 2025 (thousands) | Amount |
|---|---|
| Sales | $38,400 |
| Cost of goods sold | (25,300) |
| Gross profit | 13,100 |
| Selling, general and administrative | (8,050) |
| Depreciation | (1,450) |
| Operating income | 3,600 |
| Interest expense | (620) |
| Income before tax | 2,980 |
| Income tax | (775) |
| Net income | $2,205 |
The Balance Sheet: What Changed?
The balance sheet is a snapshot of resources and claims at one date. Comparing two dates shows where money went. Receivables rose $1.3 million and inventory $1.4 million, while payables rose only $320,000. Equity grew by net income less the $895,000 paid to the family as dividends. The business is financing its growth partly with the bank line.
| Balance sheet (thousands) | Dec. 31, 2024 | Dec. 31, 2025 |
|---|---|---|
| Cash | $2,040 | $1,150 |
| Accounts receivable | 5,600 | 6,900 |
| Inventory | 6,400 | 7,800 |
| Other current assets | 280 | 300 |
| Property, plant and equipment, net | 13,900 | 14,600 |
| Total assets | $28,220 | $30,750 |
| Accounts payable and accrued expenses | 4,330 | 4,650 |
| Bank line of credit | 0 | 1,800 |
| Long-term debt, including current portion | 9,000 | 8,100 |
| Owners' equity | 14,890 | 16,200 |
| Total liabilities and equity | $28,220 | $30,750 |
The Statement of Cash Flows: Where Did the Cash Go?
This statement reconciles profit to cash. Operating activities produced only $1.26 million of cash from $2.2 million of profit because $2.7 million was absorbed by receivables and inventory. Capital spending of $2.15 million then exceeded operating cash, and the gap, plus debt repayment and dividends, was covered by the new line and by drawing down cash.
| Statement of cash flows, 2025 (thousands) | Amount |
|---|---|
| Net income | $2,205 |
| Add depreciation | 1,450 |
| Increase in receivables | (1,300) |
| Increase in inventory | (1,400) |
| Increase in payables, accruals and other | 300 |
| Cash from operating activities | 1,255 |
| Capital expenditures | (2,150) |
| Borrowing on the line of credit | 1,800 |
| Repayment of long-term debt | (900) |
| Dividends | (895) |
| Net decrease in cash | ($890) |
Interpretation
The shortfall is a working capital problem, not a profitability problem. Days of sales in receivables rose from about 60 to 66, meaning university and pharmaceutical customers are paying more slowly, and inventory now equals about 113 days of cost of goods sold. The current ratio fell from 2.74 to 2.20, still comfortable, but the trend matters. Interest-bearing debt of $9.9 million against $16.2 million of equity is moderate.
For a manager, three questions follow. Why are customers paying later: a few large accounts, weaker collection follow-up or new credit terms granted to win sales? Is the inventory build planned, for example ahead of a large custom order, or is slow-moving stock accumulating? And should dividends continue at the 2025 level while the company borrows to fund working capital? Fridson and Alvarez (2022) note that rising receivables and inventory faster than sales are among the most reliable early signs that reported earnings are outrunning cash generation.
Conclusion
Read alone, the income statement says Millville had a strong year. Read together, the three statements show a company growing faster than its cash allows. Tightening collections and inventory would release more cash than another year of profit at this level.
References
Fridson, M. S., & Alvarez, F. (2022). Financial statement analysis: A practitioner's guide (5th ed.). Wiley.
Keown, A. J., Martin, J. D., & Petty, J. W. (2020). Foundations of finance (10th ed.). Pearson.
Libby, R., Libby, P. A., & Hodge, F. (2020). Financial accounting (10th ed.). McGraw-Hill Education.
FAM 5400 Module 1 instructions, in plain terms
Every FAM-5400 module asks for a short paper on its topic, seven in all. Module 1, Fundamental Financial Statements, covers the course objective of interpreting a company's basic statements. You will explain what each of the three statements shows, how they link and what together they say about the business. The syllabus stresses applying and analyzing over computing, so interpretation carries the weight. The glassware company and its numbers are invented for this sample; Libby and colleagues' text supplies the accrual principles. The course calls each of its seven written assignments a short paper, so the challenge is to interpret the statements in a few pages rather than to restate them.
Inside the FAM 5400 Module 1 example
Each statement appears in its own table with a short reading of what it measures. First the paper shows the year was profitable, then what moved on the balance sheet, then how net income became a fall in cash. The interpretation section turns the numbers into ratios, names the working capital cause, poses three questions a manager should ask and cites research on what rising receivables and inventory can signal. A brief conclusion states the overall reading in two sentences. Each statement gets its own section, and the interpretation section explains how the three fit together. The tables of figures are kept short so the reader sees the movement in receivables and inventory without hunting through a full set of statements.
Where the marks sit in the FAM 5400 Module 1 rubric
The seven papers of FAM-5400 carry 45 percent of the grade between them. Mentors look for accurate reading of each statement, a clear explanation of how they connect and interpretation that reaches conclusions a manager could use. The course's emphasis on analysis over calculation means the paper should explain what the numbers mean rather than simply compute them. Supporting points with the textbook and a credible outside source, and organizing the paper so each statement leads to the next, earns the strongest marks. Answers that explain why profit and cash differ, with the specific working capital changes that caused the gap, show the reading skill the course builds on in later modules.
FAM 5400 Module 1 help from the desk
First papers in this course lose points for describing each statement in isolation, for treating net income as cash and for listing ratios without saying what they imply. Show how net income reaches the cash flow statement and how equity changes on the balance sheet. When profit and cash disagree, find the working capital lines that explain the gap. Finish with questions or actions for management. A free first sample of your own FAM-5400 Module 1 assignment is available on request. Work from net income to operating cash flow one line at a time first, so each claim you make points to a figure.
Write yours, or have the desk draft it
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FAM 5400 Module 1 questions, answered
Where can I find a free FAM 5400 Module 1 sample paper?
Above: a glassware maker's three statements read side by side to explain a profitable year that drained cash.
Why can a profitable company run short of cash?
Because profit is measured on the accrual basis; growth in receivables and inventory, capital spending and debt payments can absorb more cash than operations produce.
How do the three financial statements connect?
Net income flows into equity on the balance sheet and starts the cash flow statement, which explains the change in the balance sheet's cash.
What does days sales outstanding measure?
How long, on average, customers take to pay, computed as receivables divided by sales times 365.
What textbook does FAM-5400 use?
Keown, Martin and Petty's Foundations of Finance, tenth edition, from Pearson.