Refer to Adobe Incs Statement of Cash Flows for the year ended Nov 29, 2019.
a. Calculate quality of earnings ratio for each of the 3 years presented and comment.
b. Where in the companys 10-K will you find commentary for the cash flow statement?
c. Calculate the companys 2019 Free Cash Flow using inputs solely from the cash flow statement.
d. Assuming a market cap of $225.1B, calculate markets expected long-term growth rate of Adobes free cash flow implied by its current price. Use a discount rate of 11%.
ADOBE INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) November 29, 2019 Years Ended November 30, 2018 December 1, 2017 S 2,951,458 s 2,590,774 $ 1,693,954 736,669 346,492 787,705 2,707 (47,626) 13,835 609.562 (468,936) 793 325,997 454,472 51,605 (5,494) 4,625 7,193 Cash flows from operating activities: Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, amortization and accretion Stock-based compensation Deferred income taxes Unrealized losses (gains) on investments, net Other non-cash items Changes in operating assets and liabilities, net of acquired assets and assumed liabilities: Trade receivables, net Prepaid expenses and other assets Trade payables Accrued expenses Income taxes payable Deferred revenue Net cash provided by operating activities Cash flows from investing activities: Purchases of short-term investments Maturities of short-term investments Proceeds from sales of short-term investments Acquisitions, net of cash acquired Purchases of property and equipment Purchases of long-term investments, intangibles and other assets Proceeds from sale of long-term investments and other assets Net cash used for investing activities (187,826) (531,054) 23,129 171,705 4,152 496,959 4,421,813 (1,983) (77,225) 54,920 43,837 479,184 444,693 4,029,304 (187,173) 28,040 (45,186) 151,104 (34,493) 475,402 2,912,853 (699,893) 699,540 86,137 (100,704) (394,479) (48,735) 2,550 (566,084) 765,860 1,709,480 (6,314,382) (266,579) (18,513) 4,923 (4,685,295) (1,931,011) 759,737 1,393,929 (459,626) (178,122) (29,918) 2,134 (455,584) (442,877) (2,750,000) 232,932 (1,100,000) 158,351 (240,126) (439,984) Cash flows from financing activities: Purchases of treasury stock Proceeds from re-issuance of treasury stock Taxes paid related to net share settlement of equity awards Proceeds from debt issuance, net of costs Other financing activities, net Net cash used for financing activities Effect of foreign currency exchange rates on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Supplemental disclosures: Cash paid for income taxes, net of refunds Cash paid for interest Non-cash investing activities: (2,050,000) 190,990 (393,193) 2,248,342 (1,707) (5,568) (1,738) (663,297) 2,306,072 1,642,775 11,008 (2,946,044) (12,739) 1,007,446 1,642,775 2,650,221 (1,960) (1,183,735) 8,516 1,294,757 1,011,315 2,306,072 $ S S $ 352,478 $ 210,369 $ 396,668 $ 152,075 S 81.258 $ 69,430
