Cash flows from financing activities Net change in short-term borrowings Proceeds from issuance of long-term debt Payment oflong-term debt Dividends paid Purchase ofcompany stock Payment ofcapital leaseobligations Other financing activities

Net cash used in financing activities Effect of exchange rate changes on cash

Net (decrease) increase in cash Cash at beginning of year

Cash at end of year

Required

$

503 ) 1,396 (4,080)

(4,437) m4,776) (363) (271)

(12,028) 66

(512) 7 grj7

7 395

Module 2 I Introducing Financial Statements and Transaction Analysis 2-40

a. Why does Wal-Mart add back depreciation to compute net cash flows from operating activities? b. Explainwhytheincreaseinreceivablesandinventoriesisreportedasacashoutflow.Whydo

accounts payable provide a source of cash? Explain why the decrease in accrued liabilities is

reported as a cash outflow. c. Wal-Mart reports that it invested $12,699 million in property and equipment. Is this an appropriate

type of expenditure for Wal-Mart to make? What relation should expenditures for PPE assets have with depreciation expense?

d. Wal-Mart indicates that it paid $14,776 million to repurchase its common stock in fiscal 2011 and, in addition, paid dividends of $4,437 million. Thus, Wal-Mart paid $19,213 million of cash to its

shareholders during the year. How do we evaluate that use of cash relative to other possible uses for Wal-Mart's cash?

e. Provide an overall assessment of Wal-Mart's cash flows for 2011. In the analysis, consider the sources and uses of cash.

Interpreting the Statement of Cash Flows

Following is the statement of cash flows for Wal-Mart Stores, Inc.

WAL-MART STORES, INC. Statement of Cash Flows For Year Ended January 31, 2011 ($ millions)

Cash flows from operating activities Net income Income from discontinued operations, net of tax

Incomefrom continuing operations Adjustments to reconcile income from continuing operations to net cash provided by operating activities: Depreciation and amortizations Deferred income taxes Otheroperating activities Changes in certain assets and liabilities, net of effects of acquisitions:

Increase in accounts receivable Increase in inventories Increase in accounts payable Decrease in accrued liabilities

Net cash provided byoperating activities

Cash flows from investing activities Payments for property and equipment Proceeds from disposal of property and equipment Investments and business acquisitions, net of cash acquired Other investing activities

Netcash used ininvesting activities ofcontinuing operations

Wal-Mart (WMT)

$ 16,993 ("1,034)

15,959

7,641 651

1,087

(733) (3,086)

2,557 (433)

23,643

(12,699) 489 (202) 219

(12,193)