Please provide specific processes and reason that you get each number. Do the part 1, Basic Concepts.

Refer to the attached Cash Flow Statements for Firm A and Firm B to answer the following questions. Provide all answers for the most recent year unless otherwise specified (the most recent year is on the left for Firm A and on the right for Firm B). Financial statement information other than that provided is not necessary to answer the questions. Basic Concepts: 1) If possible, determine the net change in Accounts Receivable, Inventory, and Accounts Payable over the three-year period presented for each company (you should report only one number for each three-year period). What other working capital accounts (current assets and current liabilities) have significant changes over the three-year period? Briefly discuss what these changes might imply about working capital management for these firms. 2) What are the significant non-cash or non-operating adjustments these firms made to net income (to derive Cash Flows from Operating Activities) during the years presented? That is, look at the operating section and see if you can find adjustments made to net income that were non-cash items. Your answers can be found in the operating section of the statement. Use your judgement to determine what is significant. 3) Identify the major investing and financing transactions for each firm for the three years presented. Additionally, for each firm, indicate what the primary source of cash flows has been in the years presented (looking at all sections of the statement). Use your judgement to determine what is major and primary. Basic Analysis: 1) For each firm, compute and interpret the interest coverage ratio (as defined in class) and cash flow adequacy ratio for the most recent year. (Interest Expense for Firm A is $84,566 and for Firm B is $1,417.) 2) For each firm, compute and interpret the quality of earnings ratio for the most recent year. Discuss any weaknesses of the ratio as a measure of the actual quality of earnings. Extended Analysis: 1) Indicate which, if any, of these firms are at risk of having inadequate cash flows to continue operations. Briefly discuss the factors you considered in your analysis. 2) For each of the firms, indicate which phase of the company's life cycle you believe it is in (introduction, growth, maturity, or decline). Briefly discuss the reasons for your conclusion. FIRMA 111113 Cash Changes CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Years Ended December 31, 1999 1998 1997 Operating Activities: Net loss. $ (719,968) $(124,546) $ (31,020) Adjustments to reconcile net loss to net cash provided (used) in operating activities: Depreciation and amortization of fixed assets 36.806 9,421 3,442 Amortization of deferred stock-based compensation 30.618 2,386 1,354 Equity in losses of equity-method investees 76,769 2,905 Amortization of goodwill and other intangibles 214,694 42,599 Non-cash merger, acquisition, and investment related costs 8,072 1,561 Non-cash revenue for advertising and promotional services (5,837) Loss on sale of marketable securities 8.688 271 Non-cash interest expense 29,171 23,970 Net used in operating activities before changes in operating assets and liabilities.... (320,987) (41,433) (26,160) in operating assets and liabilities, net of effects from acquisitions: Inventories (172,069) (20,513) (8,400) Prepaid expenses and other current assets (60,628) (16,758) (3,055) Accounts payable 330,166 78,674 30,172 Accrued expenses and other current liabilities 65,121 21,615 5,274 Accrued advertising 42,382 9,617 2,856 Deferred revenue 262 Interest payable 24,878 (167 Net cash provided by changes in operating assets and liabilities, net of effects from acquisitions 230,112 72,468 26,847 Net cash provided (used) in operating activities (90,875) 31,035 687 Investing Activities: Sales and maturities of marketable securities. 4,024,551 332,084 4,311 Purchases of marketable securities (4,290,173) (546,509) (122,385) Purchases of fixed assets (287,055) (28,333) (7,603) Acquisitions and investments in businesses, net of cash acquired (369,607) (19,019) Net cash used in investing activities. (922,284) (261,777) (125,677) Financing Activities: Proceeds from issuance of capital stock and exercise of stock options 64,469 14,366 53,358 Proceeds from long-term debt 1,263,639 325,987 75,000 Repayment of long-term debt (188,886) (78,108) (47) Financing costs... (35,151) (7,783) (2,309) Net cash provided by financing activities 1,104,071 254,462 126,002 Effect of exchange rate changes 489 (35) Net increase in cash 91,401 23,685 1,012 Cash at beginning of period 25,561 1,876 864 Cash at end of period 116,962 $ 25,561 $ 1,876 Supplemental Cash Flow Information: Fixed assets acquired under capital leases $ 25.850 $ $ 3,463 Fixed assets acquired under financing agreements 5,608 1,500 Stock issued in connection with business acquisitions 774,409 217,241 Equity securities of other companies received for non-cash revenue for advertising and promotional services... 54,402 Cash paid for interest, net of amounts capitalized. 59,688 26,629 326 See accompanying notes to consolidated financial statements. FIRMB CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) Year Ended December 31, 2017 2016 2018 S 16,175 $ 19,934 $ 21,856 2,371 3,033 10,073 8,116 2,975 160 (20) (246) 11,478 4,215 202 (292) (29) 15,341 5,418 274 219 441 (1,426) (3,436) 5,030 1.724 (3,583) (4,780) 7.100 283 738 18,365 (1,314) (4,615) 3,263 472 1,151 30,723 1,955 17,203 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF PERIOD OPERATING ACTIVITIES: Net income Adjustments to reconcile net income to net cash from operating activities: Depreciation of property and equipment and other amortization, including capitalized content costs Stock-based compensation Other operating expense, net Other expense (income), net Deferred income taxes Changes in operating assets and liabilities: Inventories Accounts receivable, net and other Accounts payable Accrued expenses and other Unearned revenue Net cash provided by (used in) operating activities INVESTING ACTIVITIES Purchases of property and equipment Proceeds from property and equipment incentives Acquisitions, net of cash acquired, and other Sales and maturities of marketable securities Purchases of marketable securities Net cash provided by (used in) investing activities FINANCING ACTIVITIES: Proceeds from long-term debt and other Repayments of long-term debt and other Principal repayments of capital lease obligations Principal repayments of finance lease obligations Net cash provided by (used in) financing activities Foreign currency effect on cash, cash equivalents, and restricted cash Net increase (decrease) in cash, cash equivalents, and restricted cash CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for interest on long-term debt Cash paid for interest on capital and finance lease obligations Cash paid for income taxes, net of refunds Property and equipment acquired under capital leases Property and equipment acquired under build-to-suit leases (7,804) 1,067 (116) 4,577 (11,955) 1,897 (13,972) 9,677 (12,731) (27,084) (13,427) 2,104 (2,186) 8,240 (7,100) (12,369) (7,240) (9,516 618 (327) (3,860) (147) (3,716) (212) 3,759 19,934 S 16,228 (1,301) (4.799) (200) 9,928 713 1.922 21.856 S 768 (668) (7,449) (337) (7,686) (351) 10,317 32,173 290 S 328 $ 854 319 206 412 5,704 1,209 957 9.637 3.541 575 1,184 10,615 3,641 See accompanying notes to consolidated financial statements