On the negative side if the operations face increased

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Unformatted text preview: g of shares does not directly cost the company cash. c. d. Therefore, the expense associated with issuing those shares is a non­cash charge, and similar to depreciation expense, is added back to net income in the calculation of changes in cash balances. Inventory increased substantially in 2006, drainiing the company of $49 million of cash. In 2007 and 2008, however, inventory levels declined slightly with the lower investment in this operating account freeing up $7.8 million and $0.2 million of cash. The asset impairment charges are non­cash expenses (debit expense, credit asset to lower the carrying value of the asset and decreases earnings/equity) and, similar to depreciation expense, are added back to net income in the calculation of changes in cash balances. The sale of the subsidiary in 2006 resulted in a gain, which increased net income; however, the cash inflow from the sale is dealt with in the investing section of the statement of cash flows and the gain, which increased net income, needs to be backed out of the calculation of operating cash flows. ID14–7 The statement of cash flows for Danone lists the company’s various sources of net income with an adjustment for non­cash charges, such as depreciation expense (similar to the setup in U.S. GAAP for the indirect format). Then the statement deals with changes in operating accounts that affect operating cash flow, again in a similar approach to U.S. GAAP. After totaling operating cash flow (from income, non­cash expenses and other changes, and working capital adjustments), Danone lists its investing activities (mainly the purchase and sale of long­term assets). Finally, sources and uses of debt and equity capital are totaled in the financing section. Of note, the company lists changes to marketable securities (short term, operating investments) in its financing section. The changes in cash from the three areas are tabulated to show the overall increase/decrease to company cash balances from the...
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This homework help was uploaded on 03/03/2014 for the course ACCT 5053 taught by Professor Staff during the Fall '08 term at Oklahoma State.

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