Interpreting the statement of cash flows. Exhibit 15.18 presents a statement of cash flows for Gear Locker, manufacturer of athletic shoes and sportswear, for three recent years.

a. What is the likely reason for the negative cash flow from operations?
b. How did Gear Locker finance the negative cash flow from operations during each of the three wars? Suggest reasons for Gear Locker€™s choice of financing source for each year.
c. Expenditures on property, plant, and equipment substantially exceeded the add back for depreciation expense each year. What is the likely explanation for this difference in amounts?
d. The add back for depredation expense is a relatively small proportion of net income. What is the likely explanation for this situation?
e. Gear Locker had no long-term debt in its capital structure during 2007 through 2009. What is the likely explanation for such a financialstructure?

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Gear Locker Statement of Cash Flows EXHIBIT 15.18 (all dollar amounts in thousands) (Problem 14) 2009 2008 2007 OPERATIONS Net Income. $ 55,059 $ 22,030 $ 4,371 Depreciation 1,199 446 133 Noncash Compensation to Emplayees Increase in Accounts Receivable. Increase in Inventories . Increase in Prepayments Increase in Accounts Payable .. 558 (51,223) (72,960) (34,378) (12,410) (1,990) (50,743) (8,624) (2,432) (599) 17,871 7,197 1,656 Increase (Decrease) in Other Current Liabilities Cash Flow from Operations. (537) S (9,376) 10,587 11,193 S(47,533) S(46,687) INVESTING Sale of Marketable Securities $5,661 Acquisition of Property. Plant, and Equipment ... $ (6,168) (246) $ (6,414) $ (2,546) (406) $ (2,952) (874) Acquisition of Other Noncurrent Assets (241) $ 4,546 Cash Flow from Investing ... FINAMCING $ 50,104 $ 4,566 Increase (Decrease) in Short-Term Borrowing $(19,830) Issue of Common Stock ... Cash Flow from Financing. Change in Cash Cash, Beginning of Year 69,925 $ 50,095 $ (3,852) 495 $ 50,599 $ 4,566 $ (264) 960 4,205 3,245 3,509 $ 4,205 Cash, End of Year . $ 3,245 353