Refer to the statement of cash flows in the CVS Corporation annual report in the Supplementary to Chapter 5 to answer the following questions:

1. Does CVS use the indirect method of reporting cash flows from operating activities? Other than net earnings what are the most important factors affecting the company’s cash flows from operating activities Explain the trend of each of these factors.

2. Based on the cash flows from investing activities, in 2007 and 2008, would you say that CVS is a contracting or an expanding company? Explain.

3. Has CVS used external financing during 2007 and 2008? If so, where did it come from?