$16,039 P11-50. Interpreting the Statement of Cash Flows Following is the statement of cash flows for Verizon Communications Inc. VERIZON COMMUNICATIONS INC. Statement of Cash Flows For Year Ended December 31, 2018 ($ millions) Cash Flows from Operating Activities Net Income.. Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization expense. Employee retirement benefits .. Deferred income taxes .... Provision for uncollectible accounts Equity in losses of unconsolidated businesses, net of dividends received. Oath goodwill impairment.. Changes in current assets and liabilities, net of effects from acquisition/disposition of businesses: Accounts receivable Inventories.... Prepaid expenses and other. Accounts payable and accrued liabilities and other current liabilities Discretionary employee benefits contributions Other, net Net cash provided by operating activities. Cash Flows from Investing Activities Capital expenditures (including capitalized software).. Acquisitions of businesses, net of cash acquired. Acquisitions of wireless licenses Other, net..... Net cash used in investing activities.. 17.403 (2.657) 389 980 231 4,591 (2,667) (324) 37 1,777 (1,679) 219 34,339 (16,658) (230) (1,429) 383 (17,934) Cash Flows from Financing Activities Proceeds from long-term borrowings .. Proceeds from asset-backed long-term borrowings.. Repayments of long-term borrowings and capital lease obligations Repayments of asset-backed long-term borrowings Dividends paid Other, net Net cash used in financing activities... Increase (decrease) in cash, cash equivalents and restricted cash. Cash, cash equivalents and restricted cash, beginning of period Cash, cash equivalents and restricted cash, end of period (Note 1) 5,967 4,810 (10,923) (3,635) (9.772) (1.824) (15,377) 1,028 2,888 $ 3,916 Required a. Why does Verizon add back depreciation to compute net cash flows from operating activities? What does the size of the depreciation add-back indicate about the relative capital intensity of this industry? b. Verizon reports that it invested $16,658 million in property and equipment. These expenditures are necessitated by market pressures as the company faces stiff competition from other commu- nications companies, such as Comcast. Where in the 10-K might we find additional information about these capital expenditures to ascertain whether Verizon is addressing the company's most pressing needs? What relation might we expect between the size of these capital expenditures and the amount of depreciation expense reported? c. Determine the net cash flow associated with debt in 2018. Verizon's balance sheet reveals that the company has $113,063 million of debt at 2018 year-end. What problem does Verizon's high debt load pose for its ability to maintain the level of capital expenditures necessary to remain competi- tive in its industry? d. During the year, Verizon paid dividends of $9,772 million but did not repay a sizable portion of its debt. How do dividend payments differ from debt payments? Why would Verizon continue to pay dividends in light of cash demands for needed capital expenditures and debt repayments? e. Provide an overall assessment of Verizon's cash flows for 2018. In the analysis, consider the sources and uses of cash