Page 672 - Accounting Principles (A Business Perspective)

16. Analysis using the statement of cash flows

c. What were the two major sources of cash outflows to stockholders and which was larger?
d. By how much did the investments in marketable securities grow or shrink over the three-year period?
e. By how much did long-term debt grow or shrink over the three-year period?

f. If you were a stockholder, would you feel uncertain or confident that this company will be able to pay future
dividends at the same rate as in the past?
g. For what reason or reasons might the company be buying back its own stock?
h. For the latest year, did the current assets (other than cash) and current liabilities go up or down?
i. From the information that is available, does it appear that the company is performing well or poorly?
Group project E In groups of two or three students write a two-page, double-spaced paper on one of the
following topics:

Which Is Better, the Direct or Indirect Method (of calculating net cash provided by operating activities)?
Analysis of the Johnson & Johnson Cash Flow Statement (shown in "A broader perspective" in this chapter)
Analysis of Cash Flow Statement for The Limited (shown in the Annual Report Appendix)
Your analysis should be convincing and have no spelling or grammatical errors. Your paper should be neat and
the result of several drafts. The paper should have a cover page with the title and the authors' names. Use a word
processing program if possible.
Group project F In a group of one or two other students, go to the library and locate Statement of Financial
Accounting Standards No. 95, "Statement of Cash Flows", published by the Financial Accounting Standards Board.
Write a report to your instructor answering the following questions:

Why did the Board settle on cash flows instead of working capital flows?
Why did the Board strongly recommend use of the direct method?
Why did some members of the Board dissent from the final statement?
Group project G In a group of one or two other students, go to the library and locate Statement of Financial
Accounting Standards No. 95, "Statement of Cash Flows", published by the Financial Accounting Standards Board.
Write a report to your instructor covering the following points:
Describe the controversy over how to treat interest and dividends received.

What is the Board's position on reporting cash flow per share? Why did they take that position?
What is the Board's position on noncash transactions? Why did they take that position?
Using the Internet—A view of the real world
Visit the following website for the Eastman Kodak Company:
http://www.kodak.com
By following the instructions on the screen, locate the latest statement of cash flows and then print it. Analyze

the statement and write a report to your instructor summarizing your analysis.
Visit the following website for Verizon:
http://www.verizon.com
By following the information on the screen, locate the latest statement of cash flows and then print it. Analyze
the statement and then write a report to your instructor summarizing your analysis.

Answers to self-test
True-false

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