Interpreting the statement of cash flow relations. Exhibit 4.42 presents statements of cash flow for eight companies for a recent year:

a. American Airlines (airline transportation)

b. American Home Products (pharmaceuticals)

c. Interpublic Group (advertising and other marketing services)

d. Procter \& Gamble (consumer products)

e. Reebok (athletic shoes)

f. Texas Instruments (electronics)

g. The Limited (specialty retailing)

h. Upjohn (pharmaceuticals)

Discuss the relation between net income and cash flow from operations and the pattern of cash flows from operating, investing, and financing activities for each firm.

Transcribed Image Text:

EXHIBIT 4.40 NIKE, INC. Statement of Cash Flows (all dollar amounts in millions) (Problem 361 Year 7 Year 8 Year 9 Operations Net Income Depreciation and Amortization $ 167 15 $ 243 $ 287 17 34 Other Addbacks and Subtractions (5) 5 3. Working Capital Provided by Operations $177 $ 265 $ 324 (Increase) Decrease in Accounts Receivable (38) (105) (120) (Increase) Decrease in Inventories (25) (86) (275) (Increase) Decrease in Other Operating Current Assets (2) (5) (6) Increase (Decrease) in Accounts Payable 21 36 59 Increase (Decrease) in Other Current Operating Liabilities 36 22 32 Cash Flow from Operations $ 169 $127 $ 14 Investing Sale of Property, Plant, and Equipment Acquisition of Property, Plant, and Equipment Acquisition of Investment Cash Flow from Investing Financing Increase in Short-term Debt Increase in Long-term Debt Issue of Common Stock Decrease in Short-term Debt Decrease in Long-term Debt Dividends Cash Flow from Financing Change in Cash Cash, Beginning of Year Cash, End of Year $ 3 $ 1 $ 2 (42) (87) (1) (3) $ (40) $ (89) (165) (48) $(211) T $ 269 - $ 3 $ 1 2 (8) (96) (4) (22) $(119) $ 10 74 $ 84 $ 89 53 (10) (41) $226 $ 29 89 $ 118