(5)
(6)
(7)
CASE 13.3
LOOKIN’ GOOD? (concluded)
Passing up cash discounts will delay many cash outlays by about 20 days. In the long run,
the amount paid will be about 2% greater, but in the short run, the delay should more than
offset these increased costs. (A 20-day delay in cash outlays usually amounts to over 5% of
Incurring short-term interest charges of 10% to replace long-term interest charges of 13%
will reduce interest expense and cash payments of interest. Therefore, net income, cash
Dividend payments do not enter into the determination of net income or net cash flow from
operating activities. Therefore, these two amounts will not be affected by the proposal. Cash
dividends are classified as financing activities and do not affect total cash flows from
Hill Education.
15 Minutes, Easy
a.
CASE 13.
4
PEAK PRICING
The statement is not valid because it addresses only the peak-period aspect of a peak-pricing
strategy. It is true that during the peak period, some customers will be priced out of the
20 Minutes, Medium
•
•
IMPROVING THE STATEMENT OF CASH FLOW
S
CASE 13.5
The first four parts of this case have no written requirements. Part (d) requires students to
write a synopsis, based on their research in the Securities & Exchange Commission’s (SEC)
web site, of a speech given by SEC staff member Scott Taub, in which he makes a specific
reference to the statement of cash flows.
It is difficult for one person or a few people to make improvements in financial
Improvement can come by looking at reporting as a communications exercise rather
than a compliance exercise.
Following are several points that are appropriate for inclusion in the student’s response to
this case:
ETHICS, FRAUD & CORPORATE GOVERNANC
E
Hill Education.
30 Minutes, Medium
CASE 13.6
FROM TWO COMPANIES
INTERNET
a.
b.
c. Based on the following information from the 2012 financial statements of the two
companies, Coca-Cola’s cash flow from operations is over 2 1/2 times that of
Amazon’s –$10,645 million compared to $4,180 million. The obvious reason for this
difference is the relative size and profitability of the two companies. As we have seen
smaller than Coca-Cola.
d.
e.
Companies that may have negative cash flows from operations are companies that are
in the early stage of development or companies competing in new industries. High
start-up costs and marketing costs to develop the company’s business have adverse
Companies with established products or services in established industries will often
(no solution)
(no solution)
COMPARING CASH FLOW INFORMATION
Hill Education.
2012 2011 2010
OPERATING ACTIVITIES
Consolidated net income 9,086$ 8,646$ 11,837$
De
p
reciation and amortization 1,982 1,954 1,443
Stock-based com
ensation ex
ense 259 354 380
Deferred income taxes 632 1,035 604
(in millions)
THE COCA-COLA COMPANY AND SUBSIDIARIE
S
EXCERPT FROM CONSOLIDATED STATEMENTS OF CASH FLOW
S
Year ended December 31
Hill Education.
(in millions)
2012 2011 2010
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
OPERATING ACTIVITIES: 5,269$ 3,777$ 3,444$
Net income (loss) (39) 631$ 1,152$
Adjustments to reconcile net income (loss) to net cash from operating activities:
Depreciation of property and equipment, including internal-use
software and website development, and other amortization 2,159 1,083 568
Stock-based compensation 833 557 424
Other operating expense (income), net 154 154 106
Losses (gains) on sales of marketable securities, net (9) (4) (2)
Other ex
p
ense
(
income
),
net 253 (56) (79)
AMAZON.COM, INC
.
EXCERPT FROM CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31
(in millions)