Analysis of Cash Flow for a Small Business
Charles, a financial consultant, has been self-employed for two years. His list of clients has
grown, and he is earning a reputation as a shrewd investor. Charles rents a small office, uses the
pool secretarial services, and has purchased a car that he is depreciating over three years. The following
income statements cover Charles’s first two years of business:
Charles believes that he should earn more than $11,500 for working very hard for two years. He is thinking about going to work for an investment firm where he can earn $40,000 per year. What would you advise Charles to do?