Exhibit 1, 2, and 3 contain cash-flow statements from three companies (Alpha, Beta, and Gamma). Each CF statement has three years of data. Examine the contents of these cash-flow statements carefully. Answer the following questions about each of the three CF statements.

1. For each of the years on the Statement of CFs: a. What were the firms major sources of cash? Its major uses of cash? b. Was CF from operations greater than or less than net income? Explain in detail the major reasons for the difference between these two figures? c. Was the firm able to generate enough cash from operations to pay for all its capital expenditures? d. Did the CF from operations cover both the capital expenditures and the firms dividend payments, if any? e. If it did, how did the firm invest its excess cash? f. If not, what were the sources of cash the firm used to pay for the capital expenditures and/or dividends? g. Were the working capital (current asset or current liability) accounts other than cash and cash equivalents primarily sources of cash, or uses of cash? h. What other major items affected cash flows?

2. What was the trend in: a. Net income? b. Cash flow from (continuing operations? c. Capital expenditures? d. Dividends? e. Net borrowing (proceeds less payments of short- and long-term debt)? f. Working capital accounts?

3. Based on the evidence in the Statement of CFs alone, what is your assessment of the financial strength of this business? Why?

Exhibit 1 Alpha Corporation, Consolidated Statements of Cash Flows ($ millions)

Year Ended June 30,

2016

2015

2014

Operating Activities

Loss from continuing operations

($377.9)

($623.5)

($320.6)

Depreciation

168.4

220.1

263.4

Amortization of capitalized software

41.4

58.2

39.1

Gain from sale of investments and other assets

(16.6)

(119.0)

Restructuring and other unusual items, net

135.5

384.1

125.3

Changes in other accounts affecting operations

Accounts receivable

160.8

73.4

(45.2)

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

(29.7)

Net cash provided by operating activities

125.2

89.3

46.8

Investing Activities

Investment in depreciable assets

(129.7)

(174.4)

(303.6)

Proceeds from disposal of depreciable and other assets

157

242

94.1

Proceeds from the sale of discontinued operations

25.3

407.3

Investment in capitalized software

(27.8)

(43.1)

(59.5)

Other

(6.0)

(13.0)

14.2

Net cash provided by (used in) investing activities

18.8

418.8

(254.8)

Financing Activities

(Decrease) increase in short-term borrowings

(2.6)

(222.6)

139.8

Proceeds from long-term debt

44.4

167.7

305

Payments of long-term debt

(126.5)

(544.8)

(91.7)

Proceeds from sale of Class B common stock

5.0

8.7

17.5

Purchase of treasury stock

(0.3)

(0.6)

(18.8)

Dividends paid

-

(7.2)

(26.0)

Net cash provided by (used in) financing activities

(80.0)

(598.8)

325.8

Effect of changes in foreign exchange rates

0.1

1.1

(3.9)

Increase (decrease) in cash equivalents

64.1

-89.6

113.9

Cash and equivalents at beginning of year

169.1

258.7

144.8

Cash and equivalents at end of year

$233.2

$169.1

$258.7

Exhibit 2 Beta Corporation, Consolidated Statements of Cash Flows ($ thousand)

Year Ended December 31,

2016

2015

2014

Cash Flows from Operating Activities:

Cash received from customers

$83,865

$73,273

$51,110

Cash paid to suppliers and employees

(77,820)

(65,480)

(46,589)

Interest received

643

355

132

Interest paid

(536)

(1,046)

(908)

Income taxes paid

(2,233)

(102)

(75)

Net cash generated by operating activities

3,919

7,000

3,670

Cash Flows from Investing Activities:

Capital expenditures

(6,031)

(4,600)

(3,650)

Marketable securities purchases

(8,000)

-

-

Net cash used in investing activities

(14,031)

(4,600)

(3,650)

Cash Flow from Financing Activities:

Net payments under working capital line of credit

-

(2,000)

(860)

Net payments under equipment line of credit

(985)

(126)

(388)

Principal payments under capital lease obligations

(169)

(213)

(276)

Proceeds (payment) of subordinated debt

(5,000)

-

4,400

Proceeds from the issuance of common stock

23,082

141

639

Net cash provided by (used in) financing activities

16,928

(2,198)

3,515

Effect of exchange rate changes on cash

(4)

14

-

Net increase in cash and cash equivalents

6,812

216

3,535

Cash and cash equivalents at beginning of year

5,375

5,159

1,624

Cash and cash equivalents at end of year

$12,187

$5,375

$5,159

Reconciliation of Net Income to Net Cash

Generated by Operating Activities:

Net income

$6,323

$5,201

$417

Adjustments to Reconcile Net Income to Net

Cash Consumed by Operating Activities:

Bad debt provision

99

47

98

Depreciation and amortization

4,028

2,701

2,231

Amortization of original issue discount

208

324

68

Loss on disposition of assets

17

9

58

Compensation expense related to stock grants

40

85

-

Changes in Assets and Liabilities:

(Increase) in accounts receivable

(10,837)

(613)

(1,550)

(Increase) decrease in inventory

(951)

(810)

1,043

(Increase) decrease in deposits and other assets

(665)

366

(762)

Increase (decrease) in accounts payable and

accrued expenses

5,657

(310)

2,067

Total adjustments

(2,404)

1,799

3,253

Net cash generated by operating activities

$3,919

$7,000

$3,670

Exhibit 3 Gamma Corporation, Consolidated Statements of Cash Flows ($ thousand)
	Years Ended
	June 29,	June 30,	July 1,
	2016	2015	2014
Cash Flows from Operating Activities:
Net income/(loss)	($617,427)	$74,393	$1,072,610
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation and amortization	828,560	796,201	686,738
Other adjustments to income	189,077	92,329	49,702
(Increase)/decrease in accounts receivable	105,977	(241,357)	(373,248)
(Increase)/decrease in inventories	18,616	99,743	(62,942)
(Increase)/decrease in prepaid expenses	(47,239)	(90,602)	18,965
Increase/(decrease) in accounts payable	(17,694)	107,001	30,645
(Decrease) in taxes	(105,614)	(201,560)	(75,502)
Increase in deferred revenues and customer advances	92,222	69,207	105,847
Increase in restructuring reserve	593,160	443,544	-
Increase in other liabilities	1,263	285,175	26,576
Total adjustments	1,658,328	1,359,681	406,781
Net cash flows from operating activities	1,040,901	1,434,074	1,479,391
Cash Flows from Investing Activities:
Purchase of plant, property, and equipment	(737,548)	(1,027,625)	(1,223,038)
(Increase) of other assets, net	(55,782)	(75,489)	(67,624)
Purchase of Kienzle business	(233,261)	-	-
Net cash flows from investing activities	(1,026,591)	(1,103,114)	(1,290,662)
Net cash flows from operating and investing activities	14,310	330,960	188,729
Net Flows from Financing Activities:
Proceeds from issuance of debt	14,249	17,661	40,425
Payments to retire debt	(112,426)	(20,896)	(153,245)
Purchase of treasury shares	(240,719)	(270,231)	(814,958)
Issuance of treasury shares, including tax benefits	239,653	296,225	230,733
Net cash flows from financing activities	(99,243)	22,759	(697,045)
Net increase/(decrease) in cash and cash equivalents	(84,933)	353,719	(508,316)
Cash and cash equivalents at beginning of year	2,008,983	1,655,264	2,163,580
Cash and cash equivalents at end of year	$1,924,050	$2,008,983	$1,655,264