Johnson Company Presented Its Financial Statements to a Local Bank

Essay

Johnson Company presented its financial statements to a local bank as part of a loan application.The loan officer was concerned,because,even though cash flow had increased during the year and net income was positive,cash flows from operating activities had a significant negative balance.At the same time,the company had sold a large part of its investment portfolio and issued additional stock to its shareholders.
Write a memo to Johnson Company and explain the loan officer's concern.Include the relationship between cash flows from the three types of activities.