Purpose: To help familiarize you with the financial reporting of a real company to further your understanding of the chapter material you are learning.
This case focuses on the cash flows of Bombardier Inc. Recall that inflows and outflows of cash are classified as operating activities, investing activities, or financing activities. The cash flow statement presents cash flows from each of these three activities. It is, therefore, important to understand the information provided in this revealing financial statement. The cash flow statement and additional related information for Bombardier Inc. are disclosed in its annual report found in MyAccountingLab.
Requirements
1. Look at the operating activities section of the Consolidated Statements of Cash Flows. Compare the net cash provided by operating activities to the net income for each of the two years presented. Are the net income amounts reported on the cash flow statement the same as on the income statement? How does the total cash flows provided by operating activities compare to the net income? Why do they differ? Is this difference good or bad? Have the cash flows provided from operations been increasing or decreasing? On average, what is the largest non-cash adjustment item in the operating cash flows section? Why is this amount added back each year?
2. Review Note 21. Explain what it means when receivables show a negative cash flow in 2011 and a positive cash flow in 2010. Explain what it means when the accounts payable and accrued liabilities have positive cash flows for both 2011 and 2010.
3. Look at the investing activities section of the Consolidated Statements of Cash Flows. What has created the largest outflow of cash related to investing activities? Did investing activities provide or use cash for the two years presented?
Is this good or bad for the company?
4. Look at the financing activities section of the Consolidated Statements of Cash Flows. Did financing activities provide or require cash for the two fiscal years presented? What is the significance of this information? What was the largest item in the financing section for the 2011 year-end?
5. How do you feel about the overall sufficiency of cash flows? Does the cash provided from operations cover the cash required for investing activities?
6. What was the net change in cash and cash equivalents for the most recent fiscal year? Does the ending cash and cash equivalents amount agree with the cash and cash equivalents reported on the balance sheet? Do you have any other observations about the cash flow statement?
7. What was the amount of cash actually paid for interest in 2011? Why does the cash paid for interest not agree with the financing expense for the year?