In 2004, the cash flow from operations is $1132, which is considerably lower than the net income of $8119. This can be resulted from the mainly from the increase in AR of $7663, and an increase in assets of $2550 and a decrease in income tax payable of $1312. Cash flow from operations and from issue of common stock went to purchase new plan assets and to increase the cash balance. I found the stock options to be extremely important this year, because this shows that the business is continuing to follow its policy of innovation and advancement by providing a future estimate for closures and additions of new lines. Looking at the investing activities, there are fixed assets of $685,000, which is less than 2003. This shows that the business bought the bulk of its fixed assets in 2003 and did not need to purchase as much in 2004. The financing activities saw $4707 shares issued and this was the only substantial inflow of cash. Excluding the investing activities, the cash flow from the other two activities was also positive, giving a positive net cash flow of $5326 and increase the business??™s cash reserves.
In 2003, the cash flow from operations is $11655, which is considerably HIGHER than the net income of $6814 due to adjustments for items like loss from discontinued operations of $1013 and increase in liabilities like accrued payroll and income tax payable. Cash flow from operations and from issue of common stock went to purchase new plan assets, repay long term debt and borrowings, and to increase the cash balance. The cash inflows were from notes, deferred income, sale of inventory, sale of other assets, a control on payroll costs and taxes. The cash outflows were from restricted cash, receivables, payment of payables and warranty costs. This all led to a cash inflow, which made the figure for cash flows positive and $18726 more from last year. In investing activities, the fixed assets were $169,000 more than in 2002; this caused an outflow in investing activities. The financing activities saw a growth in shares along with payment of long term debt, which resulted in $176,000 inflow of cash.
In 2002, the cash flow used by operations of $7071 is higher than the net loss of $2154 due primarily to increase in accounts receivable, inventories as well as a decrease in accounts payable. The purchase of new plant assets, repurchase of treasury stock, and cash used up in operating activities all went to decrease the balance in cash and cash equivalents. Receivables, inventory and tax payable increased by a substantial amount. Warranty costs, payables, and other assets decrease, but by a lower amount. This amount tells us that the working capital adjustments provided a gross outflow of cash which caused more cash outflow in our operating activities. The investing activities show only one item invested upon and that is the purchase of fixed assets, this caused an outflow in the investing activities. In this year, the company had to buy back stock and also repay its existing debt, probably to bring the cash flow in financing activities under control., however, since the business had previous cash balances, it was able to hold onto them, but the cash balance suffered because of this.
Explain what information you gain from the statement of cash flows that cannot be found directly from the balance sheet or income statement.
There are several items on the statement of cash flows that cannot be found on the income statement or on the balance sheet. Those items are, the amount of cash received from cash, payments made to suppliers and employees, cash receipts or payments on behalf of royalty fees, interest, taxes actually paid for, actual dividends paid or received, along with any forecasting of future cash flows.
Fraser, L. M., & Ormiston, A. (2007). Understanding financial statements (8th ed.). Upper Saddle River, NJ: Pearson/Prentice Hall.
Fraser, L. M., & Ormiston, A. (2007). Understanding financial statements (8th ed.). Upper Saddle River, NJ: Pearson/Prentice Hall. Case 4.2 Candela Corporation