A. Explain why equity in income of investees appears as a subtraction when net income in converted to cash flow from operations.

B. Compute the amount of cash received from investees as dividends each year. To answer this question, you need to refer to the income statement of Starbucks in exhibit 1.27 in Chapter 1. (integrative case 1.1)

C. Explain why stock based compensation appears as an addition to net income to compute cash flow from operations.

Exhibit 3.34 Starbucks Corporation Comparative Statements of Cash Flows (amounts in millions) (Case 3.1) Fiscal Year Ended Sep 30, 2012 Oct 2, 2011 Oct 3, 2010 OPERATING ACTIVITIES: 1,384.7 1,248.0 948.3 Net earnings including noncontrolling interests Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 580.6 550.00 Gain on sale of properties (30.2 Deferred income taxes, net 61.1 106.2 (42.00 Income earned from equity method investees, net of distributions Gain resulting from acquisition of joint ventures Stock-based compensation Other Cash provided (used) by changes in operating assets and liabilities: Accounts (90.30 (88.7) 33.4) (422.3) Inventories (273.3) 123.2 Accounts payable (105.2) 227,5 Accrued liabi es and insurance reserves 23,7 (81.8) 18.7) Deferred reven 60.8 35.8 Prepaid expenses, other current assets and (19.70 (22.5) 17.3 other assets Net cash provided by operating activities 1,750.3 1612.4 704.9 NVESTING ACTIVITIES: Purchase of investments (1,748.6) (966.0) (549.00 es and calls of investments Matu 1,796.4 430.00 209.9 Acquisitions, net of cash acquired (129.1) (55.8 12.00 (856.2) (531.9) Additions to property, plant and equipment (445.8) Cash proceeds from sale of property, plant, 5.3 5.1 and equipment Other (41.80 (13.2) Net cash used by investing activi (974.0) (789.5