3. Exhibit 5.5 contains three years of cash flow statements from Massa Corporation. Answer the following questions:

a. For each year:

1. What were the firms major sources of cash? Its major uses of cash?

2.Was CFFO greater or less than net income? Explain in detail the major reasons for the difference between these two figures.

3. Was the firm able to generate enough cash from operations to cover its capital expenditures?

4. Did the CFFO cover both the capital expenditures and the firms dividend payments?

5. If it did, what did Massa do with its excess cash?

6. If not, what were the sources of cash the firm relied on to cover its capital expenditures and/or dividends?

7. Were the working capital accounts primarily sources of cash, or users of cash? Explain.

b. Based on the evidence in the statement of cash flows alone, what is your assessment of the financial strength of this business?

96 THE STATEMENT OF CASH FLOWS Exhibit 5.5 Massa Corporation Consolidated Statements of Cash Flows (Smillions) 2018 2017 2016 $(377.9) $(623.5) $(320.6) Operating activities Loss from continuing operations Depreciation Amortization of capitalized software 168.4 220.1 263.4 41.4 58.2 39.1 Gain from sale of investments and other assets (166) (119.0) 135,5 384.1 125.3 Restructuring and other unusual items, net Changes in other accounts affecting operations Accounts receivable 160.8 73.4 145.2) Inventory 80.2 100.9 (3.0) Other current assets 17.0 (1.2) (13.0) Accounts payable and other current liabilities (91.3) (21.3) 41.0 Other 2.8 14.1 (10.5) Net cash provided by continuing operations 120.3 85.8 76.5 Net cash provided by (used in discontinued operations 4.9 3.5 TIL (29.7) Net cash provided by operating activities 125.2 89.3 46.8 (129.7) (1744) (303.6) Investing activities Investment in depreciable assets Proceeds from disposal of depreciable and other assets Proceeds from the sale of discontinued operations Investment in capitalized software 157.0 242.0 94.1 25.3 407.3 (27.8) (43.1) (59.5) Other (6.0) 13.0) 142 Net cash provided by (used in) investing activities 18.8 418.8 (254.8) (2.6) (222.6) 139.8 Financing activities Decrease) increase in short-term borrowings Proceeds from long-term debt Payments of long-term debt 44.4 167.7 305.0 (126.5) (544.8) 191.7) Proceeds from sale of common stock 5.0 8.7 17.5 (0.3) (0.6) (18.8) (7.2 1598.8 (26.0) 325.8 (80.0) Purchase of treasury stock Dividends paid Net cash provided by (used in) financing activities Effect of changes in foreign exchange rates Increase (decrease) in cash equivalents Cash and equivalents at beginning of year Cash and equivalents at end of year 0.1 1.1 (3.9) 64.1 113.9 (89.6) 258.7 $169.1 169.1 $2332 144.8 $258.7