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 have significant changes over the three-year period? Briefly discuss what these changes might imply about working capital management for these firms. Firm A YEARS ENDED DECEMBER 31, - - - - - - - - - - - 1999 1998 1997 --------- --------- $ (719,968) $(124,546) $ (31,020) 3,442 1,354 . OPERATING ACTIVITIES: Net loss................ ....... Adjustments to reconcile net loss to net cash provided (used) in operating activities: Depreciation and amortization of fixed assets... Amortization of deferred stock-based compensation... Equity in losses of equity-method investees...... Amortization of goodwill and other intangibles..... Non-cash merger, acquisition, and investment related costs....... Non-cash revenue for advertising and promotional services................ Loss on sale of marketable securities.... Non-cash interest expense........... 36,806 30,618 76,769 214,694 9,421 2,386 2,905 42,599 . . 8,072 1,561 (5,837) 8,688 29,171 271 23,970 --------- (320,987) (41, 433) (26,160) Net cash used in operating activities before changes in operating assets and liabilities..................... Changes in operating assets and liabilities, net of effects from acquisitions: Inventories.................. Prepaid expenses and other current assets. Accounts payable....... Accrued expenses and other current li Accrued advertising...................... Deferred revenue.............. Interest payable.. (172,069) (60, 628) 330,166 65,121 42,382 262 24,878 (20,513) (16,758) 78, 674 21,615 9,617 (8,400) (3,055) 30,172 5,274 2,856 (167) Net cash provided by changes in operating assets and liabilities, net of effects from acquisitions ............ 230,112 72,468 26,847 -------- -- - - - - - - (90,875) 31,035 687 Net cash provided (used) in operating activities... INVESTING ACTIVITIES: Sales and maturities of marketable securities...... Purchases of marketable securities...... Purchases of fixed assets.......................... Acquisitions and investments in businesses, net of cash acquired........ 4,024,551 (4,290,173) (287,055) 332,084 (546, 509) (28,333) 4,311 (122,385) (7,603) (369, 607) (19,019) (922, 284) (261,777) (125, 677) Net cash used in investing activities............ FINANCING ACTIVITIES: proceeds from issuance of capital stock and exercise of O FINANCING ACTIVITIES: Proceeds from issuance of capital stock and exercise of stock options............... Proceeds from long-term debt..... Repayment of long-term debt... Financing costs.. 64,469 1, 263, 639 (188,886) (35,151) ------- 1,104,071 489 ------- 91,401 25,561 14,366 325,987 (78,108) (7,783) --------- 254,462 (35) ------ 23,685 1,876 53, 358 75,000 (47) (2,309) --------- 126,002 Net cash provided by financing activities.... Effect of exchange rate changes..... Net increase in cash............. Cash at beginning of period.... ----- 1,012 864 ------- 1,876 ====== - - - - - - - - - Cash at end of period....... .......... $ 116,962 $ 25,561 $ ======== $ SUPPLEMENTAL CASH FLOW INFORMATION: Fixed assets acquired under capital leases.... Fixed assets acquired under financing agreements........... Stock issued in connection with business acquisitions...... Equity securities of other companies received for non-cas revenue for advertising and promotional services......... Cash paid for interest, net of amounts capitalized.... 25,850 5,608 774,409 3, 463 1,500 217,241 54,402 59, 688 26,629 326 See accompanying notes to consolidated financial statements. 36 Firm B CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) Year Ended December 31, 2016 2017 16,175 $ 19,934 $ 2018 21,856 2,371 3,033 10,073 1,478 8,116 2,975 15,341 5,418 4,215 160 202 274 GEOUS GASEST (20) (246) (292) (29) TES 219 441 (3,583) (4,780) 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 a FINANCING ACTIVITIES: WINTER Proceeds from long-term debt and other -7,100 (1,426) (3,436) 5,030 1,724 1,955 17,203 (1,314) (4,615) 3,263 472 1,151 30,723 283 7382 18,365 (7,804) 1,067 (116) 4,577 (7,240) (9,516) (11,955) 1,897 (13,972) 677 (12,731) (27,084) (13,427) 2,104 (2,186) 8,240 (7,100) (12,369) 12 L 618 16,228 768 KLASSE SHISSIMI UNES EE (327) (3,860) (147) (3,716) (212) 3,759 19,934 (1,301) (4,799) (200) 9,928 713 1,922 21,856 (668) (7,449) (337) (7,686) (351) 10,317 32,173 FIS 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 are 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 K EN S $ $ DED GEN $ $ 854 NA 290 206 412 328 big 319 957 SERIRDIG SRL 1,184 ANIM FOTO VIDEO 5,704 9 ,637 10,615 1,209 3,541 3,641 See accompanying notes to consolidated financial statements. 36 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 have significant changes over the three-year period? Briefly discuss what these changes might imply about working capital management for these firms. Firm A YEARS ENDED DECEMBER 31, - - - - - - - - - - - 1999 1998 1997 --------- --------- $ (719,968) $(124,546) $ (31,020) 3,442 1,354 . OPERATING ACTIVITIES: Net loss................ ....... Adjustments to reconcile net loss to net cash provided (used) in operating activities: Depreciation and amortization of fixed assets... Amortization of deferred stock-based compensation... Equity in losses of equity-method investees...... Amortization of goodwill and other intangibles..... Non-cash merger, acquisition, and investment related costs....... Non-cash revenue for advertising and promotional services................ Loss on sale of marketable securities.... Non-cash interest expense........... 36,806 30,618 76,769 214,694 9,421 2,386 2,905 42,599 . . 8,072 1,561 (5,837) 8,688 29,171 271 23,970 --------- (320,987) (41, 433) (26,160) Net cash used in operating activities before changes in operating assets and liabilities..................... Changes in operating assets and liabilities, net of effects from acquisitions: Inventories.................. Prepaid expenses and other current assets. Accounts payable....... Accrued expenses and other current li Accrued advertising...................... Deferred revenue.............. Interest payable.. (172,069) (60, 628) 330,166 65,121 42,382 262 24,878 (20,513) (16,758) 78, 674 21,615 9,617 (8,400) (3,055) 30,172 5,274 2,856 (167) Net cash provided by changes in operating assets and liabilities, net of effects from acquisitions ............ 230,112 72,468 26,847 -------- -- - - - - - - (90,875) 31,035 687 Net cash provided (used) in operating activities... INVESTING ACTIVITIES: Sales and maturities of marketable securities...... Purchases of marketable securities...... Purchases of fixed assets.......................... Acquisitions and investments in businesses, net of cash acquired........ 4,024,551 (4,290,173) (287,055) 332,084 (546, 509) (28,333) 4,311 (122,385) (7,603) (369, 607) (19,019) (922, 284) (261,777) (125, 677) Net cash used in investing activities............ FINANCING ACTIVITIES: proceeds from issuance of capital stock and exercise of O FINANCING ACTIVITIES: Proceeds from issuance of capital stock and exercise of stock options............... Proceeds from long-term debt..... Repayment of long-term debt... Financing costs.. 64,469 1, 263, 639 (188,886) (35,151) ------- 1,104,071 489 ------- 91,401 25,561 14,366 325,987 (78,108) (7,783) --------- 254,462 (35) ------ 23,685 1,876 53, 358 75,000 (47) (2,309) --------- 126,002 Net cash provided by financing activities.... Effect of exchange rate changes..... Net increase in cash............. Cash at beginning of period.... ----- 1,012 864 ------- 1,876 ====== - - - - - - - - - Cash at end of period....... .......... $ 116,962 $ 25,561 $ ======== $ SUPPLEMENTAL CASH FLOW INFORMATION: Fixed assets acquired under capital leases.... Fixed assets acquired under financing agreements........... Stock issued in connection with business acquisitions...... Equity securities of other companies received for non-cas revenue for advertising and promotional services......... Cash paid for interest, net of amounts capitalized.... 25,850 5,608 774,409 3, 463 1,500 217,241 54,402 59, 688 26,629 326 See accompanying notes to consolidated financial statements. 36 Firm B CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) Year Ended December 31, 2016 2017 16,175 $ 19,934 $ 2018 21,856 2,371 3,033 10,073 1,478 8,116 2,975 15,341 5,418 4,215 160 202 274 GEOUS GASEST (20) (246) (292) (29) TES 219 441 (3,583) (4,780) 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 a FINANCING ACTIVITIES: WINTER Proceeds from long-term debt and other -7,100 (1,426) (3,436) 5,030 1,724 1,955 17,203 (1,314) (4,615) 3,263 472 1,151 30,723 283 7382 18,365 (7,804) 1,067 (116) 4,577 (7,240) (9,516) (11,955) 1,897 (13,972) 677 (12,731) (27,084) (13,427) 2,104 (2,186) 8,240 (7,100) (12,369) 12 L 618 16,228 768 KLASSE SHISSIMI UNES EE (327) (3,860) (147) (3,716) (212) 3,759 19,934 (1,301) (4,799) (200) 9,928 713 1,922 21,856 (668) (7,449) (337) (7,686) (351) 10,317 32,173 FIS 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 are 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 K EN S $ $ DED GEN $ $ 854 NA 290 206 412 328 big 319 957 SERIRDIG SRL 1,184 ANIM FOTO VIDEO 5,704 9 ,637 10,615 1,209 3,541 3,641 See accompanying notes to consolidated financial statements. 36