Heather and Scott, two young financial analysts, were reviewing financial statements for Google, one of the world’s largest technology companies. Scott noted that the company did not report any dividends in the financing activity section of the statement of cash flows and said, “I have heard that Google is a very profitable company. If it’s so profitable, why isn’t it paying any dividends?” Heather wasn’t convinced that Scott was looking in the right place for dividends but didn’t say anything. Scott continued the discussion by noting, “Sales for Google are up nearly 46 percent over the previous two years, while net income is up over $3 billion compared to last year, and cash flows from operating activities are up over $6 billion to a total of $54 billion.” At that point, Heather noted that the statement of cash flows reported that Google had spent $23 billion in capital expenditures and $1 billion paying back debt. She was confused about whether Google was in a good position to pay dividends or not.

Required:
1. Is Heather’s concern that Scott is looking at the wrong section of the statement of cash flows justified?
2. Is there a right time for a company like Google to start paying a dividend?