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

4.14 continued.

b.AMAZON.COM

Statement of Cash Flows

For Year 4 and Year 5

Year 4Year 5

Operations:

Net Income (Loss)$(5,777)$(27,590)

Depreciation2864,742

(Increase) Decrease in Inventories(554)(8,400)

(Increase) Decrease in Prepayments(307)(2,977)

Increase (Decrease) in Accounts Payable—

Merchandise Suppliers2,75329,845

Increase (Decrease) in Other Current Lia-

bilities2,0107,603

Cash Flow from Operations$(1,589)$3,223

Investing:

Acquisition of Property, Plant and Equip-

ment, and Marketable Securities$(1,360)$(30,539)

Financing:

Increase in Long-Term Debt$78,202

Issue of Common Stock$8,20152,675

Cash Flow from Financing$8,201$130,877

Increase (Decrease) in Cash$5,252$103,561

Cash, Beginning of Year9966,248

Cash, End of Year$6,248$109,809

c.Amazon.com operated at a net loss each year.  Its cash flow from operations was not as negative as the net loss, and even turned positive in Year 5, because the firm delayed paying its creditors.  Note that the increase in accounts payable to merchandise suppliers exceeds the increase in merchandise inventories each year.  Cash flow from operations was not sufficient in Year 5 to finance the substantial growth in capital expenditures.   Amazon.com used a mixture of long-term debt and common stock to finance these long-term assets.

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