Calculating and interpreting cash flows. Omnicom Group is a marketing services firm.

Omnicom Group creates advertising copy for clients and places the advertising in television, magazines, and other media. Accounts receivable represent amounts owed by clients and accounts payable represent amounts payable to various media. Omnicom Group has purchased other marketing services firms in recent years. Selected data for Omnicom Group for three recent years appear below (amounts in millions):

Net Income Depreciation and Amortization Expense . . .

Increase (Decrease) in Accounts Receivable Increase (Decrease) in Inventories Increase (Decrease) in Prepayments Year 3 Year 4 Year 5

$279 $363 $499 164 196 226 238 648 35 514 13 98 64

(10)

125 Increase (Decrease) in Accounts Payable Increase (Decrease) in Other Current Liabilities . . .
Acquisition of Property, Plant, and Equipment ....
Acquisition of Investments in Securities (noncurrent)
Common Dividends Long-term Stock Paid Debt Issued Issued (Reacquired)
Year 3 Year 4 Year 5 330 786 277 70 278 420 115 130 150 469 643 885 88 104 122 208 83 599 42 (252) (187)

a. Prepare a comparative statement of cash flows for Omnicom Group for the three years.
Use the indirect method of computing cash flow from operations.

b. Discuss the relation between net income and cash flow from operations and the pattern of cash flow from operating, investing, and financing activities during the three years.