X hits on this document

223 views

0 shares

0 downloads

0 comments

14 / 89

STATEMENT OF CASH FLOWS:  REPORTING THE EFFECTS OF OPERATING, INVESTING, AND FINANCING ACTIVITIES ON CASH FLOWS   T4-X

4.19(Nokia; calculating and interpreting cash flow from operations.)

a.

Year 8Year 9Year 10Year 11

Net Income1,0321,6892,5423,847

Depreciation

Expense4655096651,009

(Inc.) Dec. in Accounts

Receivable(272)(1,573)(982)(2,304)

(Inc.) Dec. in Inven-

tories(121)(103)(362)(422)

(Inc.) Dec. in Prepay-

ments77(17)(33)49

Inc. (Dec.) in Accounts

Payable90140312458

Inc. (Dec.) in Other

Current Liabilities4501,049867923

Cash Flow from

Operations1,7211,6943,0093,560

b.The addback for depreciation, a noncash expense, causes cash flow from operations to exceed net income each year.  Inventories increased in line with increases in net income.  Nokia increases its accounts payable to finance the increased inventories.  The firm also increased other current liabilities to finance growing operations.  Variations in the relation between net income and cash flow from operations result from variations in accounts receivable.  Unusually large increases in accounts receivable in Year 9 and Year 11 cause cash flow from operations to approximately equal net income in Year 9 and to be less than net income in Year 11.  The variations in accounts receivable might result from a conscious effort by Nokia to vary credit terms to stimulate sales.  It may also reflect conditions in the economy that cause its

Document info
Document views223
Page views223
Page last viewedThu Dec 08 03:22:58 UTC 2016
Pages89
Paragraphs1584
Words7354

Comments