Questions 1. Examine the contents of the three cash flow statements carefully and analyze the situation for each of the three companies. When answering the following questions, please provide a qualitative assessment of major accrual and cash flow components (there is no need for specific numbers). For example, to answer the question Increase in working capital? indicate if the capital increased, decreased, or did not materially change, and then explain which component of working capital contributed most significantly to the change for each of the years. a. List major sources of cash b. List major uses of cash c. Is cash from operations greater than net income? d. List the major reasons for the difference between cash from operations and net income e. Is cash from operations greater than capital expenditures? f. Is cash from operations less than capital expenditures? And how did the company finance their capital expenditures? g. What is the trend in net income? h. What is the trend in cash from operations? i. What is the trend in capital expenditures? j. What is the trend in working capital? 2. Based on your analysis above, what is your overall assessment of the cash flow situation for each company? Please rate each company on a scale of 1 to 5, where 1 indicates that the corporation will declare bankruptcy next year, 3 represents a reasonable cash flow situation with only a few problems noted, and 5 represents an outstanding cash flow situation. Exhibit 1 Company A, Consolidated Statements of Cash Flows ($ millions) 2017 2016 2015 S (383) $ (2,221) $ (1,128) 765 CASH FLOWS FROM OPERATING ACTIVITIES Net loss Adjustments to reconcile net loss to net cash used in operating activities: Tax valuation allowance Depreciation and amortization Impairment charges Gain on sales of assets Pension plan contributions and settlements Other Change in operating assets and liabilities: Inventories Accounts Payable Deferred Income Taxes Other operating assets Other operating liabilities Net cash used in operating activities (1,395) 378 142 (1,648) 167 (19) 368 427 (247) (334) 15 217 430 274 (743) (311) 66 1,144 (472) 670 51 1,213 (526) (907) (52) (229) (47) (614) 54 (136) (2,167) (477) 118 (1,842) (1,381) 386 2,730 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sales of property and investments Proceeds from Business Unit Proceeds from sales of receivables Purchases of property and equipment Net cash provided by investing activities 1,109 572 293 (80) 1,894 (142) 244 (211) 2.519 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from debt issuances Repayments of debt Increase (decrease) in short-term borrowings Proceeds from sale-leaseback financing Debt issuance costs Net cash provided by (used in) financing activities 1,020 (1,356) 271 106 2,028 (66) (797) 71 (1,405) 583 508 (43) (51) (50) 1,185 (364) NET INCREASE (DECREASE) IN CASH CASH, BEGINNING OF YEAR CASH, END OF YEAR 48 238 286 (12) 250 238 $ $ Source: Company 10-K. Exhibit 2 Company B, Consolidated Statements of Cash Flows ($ thousands) 155 For the Fiscal Year Ended Cash Flows from Operating Activities July 28, 2018 July 29, 2017 July 30, 2016 Net income $ 44,900 $ (594) $ 33,181 Reconciliation of net income to net cash provided by operating activities: Deferred income taxes 6,588 (6,728) (5,869) Remeasurement of preferred stock warrant liability (10,685) 18,881 3,019 Inventory reserves 1,916 3,591 5,941 Stock-based compensation expense 15,403 13,182 6,597 Depreciation and amortization 10,542 7,655 3,544 Loss on disposal of property and equipment Change in operating assets and liabilities: Inventory (19,416) (26,375) (26,509) Prepaid expenses (17,307) (7,596) (9,504) Accounts payable 35,502 7,841 10,192 Accrued liabilities (3,595) 17,748 10,904 Deferred revenue 1,720 2,719 1,574 Gift card liability 1,624 1,993 1,530 Other liabilities 4,831 6,307 10,516 Net cash provided by operating activities 72,178 38,624 45,116 Cash Flows from Investing Activities Purchase of property and equipment (16,565) (17,130) (15,238) Net cash used in investing activities (16,565) (17,130) (15,238) Cash Flows from Financing Activities Proceeds from stock issuance, net of fees 129,046 Proceeds from the exercise of stock options 5,788 2,408 Repurchase of common stock related to exercised options (39) (3,557) Payment of deferred offering costs (1,879) Net cash provided by (used in) financing activities 134,795 (3,028) 499 Net increase in cash 190,408 18,466 30,377 Cash at beginning of period 119.958 101.492 71,115 Cash at end of period $ 310,366 $ 119,958 $ 101,492 499 Source: Company 10-K Exhibit 3 Company C, Consolidated Statements of Cash Flows ($ millions) Year Ended December 31, 2017 2016 2015 19,334 $ 15,890 $ 14,557 $ 3,033 2,371 596 8,116 2,975 11,478 4,215 (90) (29) 6,281 2,119 405 81 140 (246) (3,583) (4,786) 7,175 283 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD OPERATING ACTIVITIES: Net income Adjustments to reconcile net income to net cash from operating activities: Depreciation Stock-based compensation Other expense (income), net Deferred income taxes Changes in operating assets and liabilities: Inventories Accounts receivable 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 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 debt Net cash provided by (used in) financing activities Foreign currency effect on cash and cash equivalents Net increase (decrease) in cash and cash equivalents CASH AND CASH EQUIVALENTS, END OF PERIOD (1,426) (3,367) 5,030 1,724 1,955 17,272 (2,187) (1,755) 4,294 913 1,292 12,039 738 18,434 (11,955) 1,897 (13,972) 9,988 (13,777) (27,819) (7,804) 1,067 (116) 4,733 (7,756) (9,876) (5,387) 798 (795) 3,025 (4,091) (6,450) 16,231 (6,371) 9,860 713 1,188 20,522 621 (4,361) (3,740) (212) 3,444 19,334 353 (4,235) (3,882) (374) 1,333 15,890 $ $ $ Source: Company 10-K