Presented below are the financial statements of the Wacoal Corporation, a leading manufacturer of women’s apparel in Japan. Wacoal’s footnotes and other supplementary data revealed the following additional information:

1. Depreciation and amortization on property, plant, and equipment taken in Year 2 amounted to ¥3,265 million.

2. Effective April 1, Year 2, Wacoal changed its method of accounting for employee retirement benefits.As a result of this change in accounting principle, net income for Year 2 decreased by ¥1,429 million, including the cumulative effect of the change as of the beginning of the year of ¥1,286 million.

3. The consolidated statement of shareholders’ equity revealed that cash dividends paid in Year 2 were ¥2,544 million, and that treasury stock in the amount of ¥2,803 million had been repurchased and had been deducted against retained earnings.

Required
Prepare a statement of cash flow for Year 2 using the indirect method format. What does the company’s statement of cash flow reveal about the company’s financial health?

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(in millions of Yen) WACOAL CORPORATION Consolidated Balance Sheet Year 2 Year 1 Assets Cash... 7,634 9,403 Time deposits & certificates of deposit. 33,562 40,486 Total cash & cash equivalents.... 41,196 49,889 Marketable securities.... 34,499 24,178 Notes & accounts receivable Trade notes. 2,651 2,902 Trade accounts 22,049 21,851 Allowance for returns & doubtful receivables (2,869) (2,633) Inventories. 25,601 25,515 Deferred income taxes. 4,647 4,142 Other current assets. 1,734 1,890 Total current assets 129,508 127,734 Property, plant & equipment Land.. 25,284 25,247 Buildings 55,197 54,784 Machinery & equipment. 11,530 11,148 Total.... 92,011 91,179 Accumulated depreciation. (33,367) (31,189) Net property, plant, & equipment. 58,644 59,990 Other assets Investments in affiliates. 8,670 7,305 Investments 28,877 37,327 Lease deposits & other 6,563 5,365 Total other assets. 44,110 49,997 Total 232,262 237,721