Foster's Group is a global multi-beverage Australian company that produces and markets a variety of beer, wine,

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Foster's Group is a global multi-beverage Australian company that produces and markets a variety of beer, wine, spirits, cider, and non-alcoholic bevèrages. Foster's reports its cash flows from operating activities by using the direct method. Its statement of cash flows for 2009 included the following information (in millions of Australian dollars):image text in transcribed

Foster's also presents a reconciliation of profit to cash flows from operating activities in a note to its financial statements. A condensed version of this reconciliation, which is essentially the indirect method of reporting cash flows from operations, is presented below.image text in transcribed

image text in transcribed

Required:
1. As a user of financial statements, would you prefer to see the cash flows from operating activities reported using the direct method or the indirect method? Explain.
2. Did Foster's sales to its customers exceed the amount it collected from them during fiscal year 2009? Can you determine Foster's sales during fiscal year 2009? Show computations.
3. Assume, for simplicity, that Foster's purchases its inventories from trade suppliers.
Did Foster's pay its trade suppliers for all the purchases it made during fiscal year 2009 ?
Explain.
4. Compute and interpret the quality of earnings ratios for both years 2008 and 2009.
5. What additional information is reported under the indirect method but is not reported under the direct method.

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Financial Accounting

ISBN: 9780070001497

4th Canadian Edition

Authors: Patricia A. Libby, Daniel Short, George Kanaan, Maureen Libby Gowing, Robert Libby

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