Calculating and interpreting cash flows. Amazon. cum sells books over the Internet. The changes in its balance sheet accounts for two recent years appear below (amounts in thousands):

Year 4 Year 5 Cash Marketable Securities Inventories Prepayments Property, Plant, and Equipment (at cost)

Accumulated Depreciation Accounts Payable— Merchandise Suppliers Other Current Liabilities Common Long-term Stock Debt Retained Earnings

$5,252 Increase $103,561 Increase — 15,256 Increase 554 Increase 8,400 Increase 307 Increase 2,977 Increase 1,360 Increase 15,283 Increase 286 Increase 4,742 Increase 2,753 Increase 29,845 Increase 2,010 Increase 7,603 Increase — 78,202 Increase 8,201 Increase 52,675 Increase 5,777 Decrease 27,590 Decrease

a. Prepare columnar work sheets for the statement of cash flows for Year 4 and Year 5 using the format in the upper panel of Exhibit 4.4. Amazon.com did not declare or pay dividends during either year.

b. Prepare a statement of cash flows for Year 4 and Year 5 using the indirect method of computing cash flow from operations. The balance in cash was S6.248 at the end of Year 4, and

$109,809 at the end of Year 5.

c. Discuss the relation between net income and cash flow from operations and the relation between cash flow from operating, investing, and financing activities during the two years.