111-58. Interpreting the Statement of Cash Flows Following is the statement of cash flows for Roger's Communications, a Canadian company operat- ing in the telecom and media industry. LO1,5 Roger's Communications ROGER'S COMMUNICATIONS Consolidated Statements Of Cash Flows Years ended December 31 (in millions of Canadian dollars) 2015 2014 .............................................. $1,381 1.38 1 $1,341 2,277 87 774 466 2,144 66 817 506 37 55 (34) (16) (102) 82 48 Operating activities: Net income for the year ................. Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization .. Program rights amortization ... Finance costs ................ Income taxes.... Stock-based compensation ... Post-employment benefits contributions, net of expense Gain on acquisition of Mobilicity. Other ......................................................... Cash provided by operating activities before changes in non-cash working capital, income taxes paid, and interest paid Change in non-cash operating working capital items .... Cash provided by operating activities before income taxes paid and interest paid Income taxes paid .. Interest paid ....... Cash provided by operating activities ..... ........... Investing activities: Additions to property, plant and equipment... . Additions to program rights ....... ................ Change in non-cash working capital related to property, plant and equipment and intangible assets ... Acquisitions and other strategic transactons, net of cash acquired ........ Other............................................................. Cash used in investing activities ...... 5,004 (302) 4,702 (184) (771) 3,747 4,925 11 4,936 (460) (778) 3,698 (2,440) (64) (116) (1,077) (70) (3,767) (2,366) (231) 153 (3,456) (51) (5,951) continued from previous page Years ended December 31 (in millions of Canadian dollars) 2015 2014 Financing activities: Proceeds received on short-term borrowings ......... Repayment of short-term borrowings............. Issuance of long-term debt ....... Repayment of long-term debt .... Proceeds on settlement of debt derivatives and forward contracts........ Payments on settlement of debt derivatives, forward contracts, and bond forwards Transaction costs incurred ............... Dividends paid ....... Cash (used in) provided by financing activities Change in cash and cash equivalents .... Cash and cash equivalents, beginning of year ... Cash and cash equivalents, end of year ... $ 294 (336) 7,338 (6,584) 1,059 (930) (9) (977) (145) (165) 176 $ 11 $ 276 (84) 3,412 (2,551) 2,150 (2,115) (30) (930) 128 (2,125) 2,301 $ 176 The change in non-cash operating working capital items is as follows: Accounts receivable...... Inventories ........... Other current assets. ........ Accounts payable and accrued liabilities. Unearned revenue .. $ (185) (66) (23) $ (81) 26 (18) 33 (61) 86 $ (302) $ 11 Cash and cash equivalents (bank advances) are defined as cash and short-term deposits, which have an original maturity of less than 90 days, less bank advances. As at December 31, 2015 and 2014, the balance of cash and cash equivalents comprised cash and demand deposits. Required a. Roger's reports net income of $1,381 million and net cash inflows from operating activities of $3,747 million. Part of the difference relates to depreciation and amortization of $2,277 million. Why does Roger's add this amount in the computation of operating cash flows? b. Roger's reports a positive amount of $55 million relating to stock-based compensation. What does this positive amount signify? c. Roger's reports a cash outflow of $2,440 million relating to the acquisition of PPE. Is this cash outflow a cause for concern? Explain. d. Roger's net cash outflow for financing activities is $145 million. What did Roger's use this cash for? e. The statement reports changes in noncash operating working capital items. Explain the nega tive amount for accounts receivable and the positive amount for accounts payable and accrued liabilities
