year ·tt,ub. do not Jtl<l due w mluulin~. 25.1 (6.11 (24.41 (6.5) (3.11 (45.0) 56.1 (29.41 (131.8) 8.7 (152.5) 37.7 72.6 (11.61 (7.9) 12.5 -103.3 7.0 7.2 S 14.1 on Ametek's income statement was the sharp increase in accounts receiv-able and inventories already noted. In many textbook examples, the cash flow statement is a simple re-arrangement of the sources and uses statement. In real companies the sit-uation is invariably more complic,1ted. Ametek illustrates two such complications. During 2001 , Ametek acquired three small firms for a to-tal cost of $ 132 million. , ~ hen preparing the company's consolidated bal-ance sheet, the accountants properly added the value of these companies' individual assets, line by line, to Ametek's. H owever, because these addi-tions did not consume cash beyond the $ 132 million acquisition price ap-pearing under "cash flow from investing activities," they wen:: ignored on
■ -18 Part One .•ln·essing the f-'i111111ti11I H,-nltb of the l-i1111 the cash flow statement. This means that the numbers appearing on the cash flow statement under "changes in assets and liabilities (net of acqui-sitions)" do not equal the changes in assets calculated from Ametek's bal-ance sheets and appearing in 'Table I. I. . . Ametek's cash flow from operating activities also con tams a mysterious entry entitled "decrease in accounts receivable securitized." Here is what happened. Until April 2001, Ametek, like many other companies, securi-tizcd many of their receivables. In effect, they pledged these receivables as collateral for loans in such a way that neither the receivables nor the loans appeared on the company's financial statements. Securitization of ac-counts receivable is a relatively innocuous example of the much-criticized practice of off-balance-sheet financing, a family of financial techniques enabling companies to conceal the true extent of their indebtedness from investors. T hen in April, management had a change of heart and brought the securitized receivables and accompanying debt back onto their balance sheet. The result was a $45 million increase in accounts receivable and an equal rise in "net increase in long-term borrowing." Management could have buried thjs change among other accounts but in the interest of more complete disclosure, chose to highlight it in a separate line item, "decrease in accounts receivable securitized." M uch of the information contained in a cash flow statement can be gleaned from careful study of a company's income statement and balance sheet._ Nonetheless, the statement has three principal virtues. First, ac-count111g neophytes and those who do not trust accrual accounting have at least some hope of understanding it Second the stateineiit p "d . . . · , rov1 es more accurate 111for111at1on about certain activities such ass · · 'h . . , ecunazaaon, t an one can mfer from mcome statements and balance h I Tl · d . . s eets a one. 11r 1t casts a welcome light on the issue of
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- Winter '16