Page 660 - Accounting Principles (A Business Perspective)

16. Analysis using the statement of cash flows

Unsecured and uncommitted multicurrency lines of credit are available to meet any short-term working capital
needs for subsidiaries operating outside the US. These lines total USD 56 million, of which USD 14 million was
drawn as of 2004 March 31.

Debt ratings for the Company's senior unsecured notes and its bank credit facilities are BBB+ and Baa1 from
Standard & Poor's and Moody's Investor Services, respectively. The Company's Commercial Paper program is rated
A-2 from Standard & Poor's and P-2 from Moody's. Peak borrowings under all debt facilities during fiscal year 2004
totaled approximately USD 5.4 billion with a weighted-average interest rate of 7.2 per cent.
As of 2004 March 31, the cumulative number of shares purchased under the Company's various open market
Common Stock repurchase programs, including almost 16 million shares purchased in the current fiscal year, was
166 million. The remaining number of shares authorized for repurchase is approximately 34 million.

Capital resource requirements as of 2004 March 31 consisted of lease obligations for office space, computer
equipment, mortgage or loan obligations and amounts due as a result of product and company acquisitions. It is
expected that existing cash, cash equivalents, marketable securities, the availability of borrowings under credit lines
and cash provided from operations will be sufficient to meet ongoing cash requirements.
The Company expects its long-standing history of providing extended payment terms to customers to continue
under the new business model and thus does not expect a change to its future cash flow, since customers are
expected to continue to finance their purchases over the contract period.
a. Explain how the company could have a net loss in 2004 and yet have a positive net cash provided by operating
activities.

b. What was the reason given by management for repaying all outstanding amounts under revolving credit
agreements.
c. What is the interest rate on borrowings?
d. What information would normally appear immediately below the statement of cash flows that seems to be
missing?
e. Does the amount of cash provided by operating activities seem large enough to continue the present dividend
payments?

f. Given the following data, calculate the cash flow per share of common stock ratio, the cash flow margin ratio,
and cash flow liquidity ratio.
(in millions)
Average number of shares of common stock outstanding 583
Net sales 4,198
Cash and marketable securities 850
Current liabilities 2,286
Problem D Mechan Company develops, manufactures, markets, installs and supports a wide range of

standards-based LAN and WAN connectivity hardware and software products. The company's statements of cash
flow for the years 2008-2010 follow. Then the relevant portion of Management's Discussion and Analysis of the
statement of cash flows is provided.
Consolidated statements of cash flows
Years ended 2010 February 29, and 2009 February 28 and 2008
(In thousands)
2010 2009 2008
Cash flows from operating activities:
Net income $ 164,418 $ 161,974 $ 119,218
Adjustments to reconcile net income to net cash
provided by operating activities:

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