a. Explain why equity in income of investees appears as a subtraction when net income in converted to cash flow from operations.
b. Compute the amount of cash received from investees as dividends each year. To answer this question, you need to refer to the income statement of Starbucks in exhibit 1.27 in Chapter 1.
c. Explain why stock based compensation appears as an addition to net income to compute cash flow from operations.

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Exhibit 3.34 Starbucks Corporation Comparative Statements of Cash Flows (amounts in millions) (Case 3.1) Oct 2, 2011 Fiscal Year Ended Sep 30, 2012 Oct 3, 2010 OPERATING ACTIVITIES: $ 1,384.7 $ 1,248.0 $ 948.3 Net earnings including noncontrolling interests Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization Gain on sale of properties 580.6 5500 540.8 (30.2) Deferred income taxes, net 61.1 1062 (42.0) Income earned from equity method investees, net of distributions Gain resulting from acquisition of joint ventures Stock-based compensation (49.3) (32.9) (17.2) (55.2) (23.1) 153.6 145.2 113.6 Other 23.6 33.3 75.5 Cash provided/(used) by changes in operating assets and liabilities: Accounts receivable (90.3) (88.7) (334) Inventories Accounts payable Accrued liabilities and insurance reserves (273.3) (422.3) 123.2 (105.2) 227.5 (3.6) 23.7 (81.8) (18.7) 24.2 Deferred revenue 60.8 35.8 Prepaid expenses, other current assets and other assets (19.7) (22.5) 17.3 1,6124 Net cash provided by operating activities 1,750.3 1,704.9 INVESTING ACTIVITIES: Purchase of investments (1,748.6) (966.0) (549.0) Maturities and calls of investments 1,7964 430.0 (55.8) 209.9 Acquisitions, net of cash acquired Additions to property, plant and equipment Cash proceeds from sale of property,. plant, and equipment Other (129.1) (12.0) (856.2) (531.9) (445.8) 53 1174 5.1 (41.8) (974.0) (13.2) (1,019.5) 23 Net cash used by investing activities (789.5) Exhibit 3.34 (Continued) FINANCING ACTIVITIES: (Payments/proceeds from short-term borrowings Purchase of noncontrolling interest Proceeds from issuance of common stock Excess tax benefit from exercise of stock options Cash dividends paid Repurchase of common stock Minimum tax withholdings on share-based awards Other (30.8) 308 (27.5) (45.8) 236.6 2504 1328 169.8 103.9 36.9 (513.0) (389.5) (171.0) (549.1) (555.9) (285.6) (58.5) (15.0) (4.9) (0.5) (745.5) (5.2) (608.0) (8.4) Net cash used by financing activities Effect of exchange rate changes on cash and cash equivalents Net increase (decrease) in cash and cash equivalents (346.0) 9.7 (0.8) (15.9) (5.2) 564.2 40.5 CASH AND CASH EQUIVALENTS: Beginning of period End of period 1,148.1 $ 1,188.6 1,164.0 $ 1,148.1 599.8 $1,164.0 Source: Starbucks Corporation, Form 10-K for the Fiscal Year ended September 30, 2012.