The statement of cash flows for Yahoo! is reproduced here.

YAHOO! INC

Consolidated Statement of cash flows $($in thousands$)$

year $8$ year $7$ year $6$

cash flow from operating activities

net income $($loss$)$ $$25,588($$$25,520)($$$6,427)$

Adjustments to reconcile net income $($loss$)$ to net cash provided by

$($used in$)$ operating activities:

depreciation and amortization $102152,737639$

tax benefit from stock options $17,827\_\_$

non$-$cash charges related to stock option grants and warrant

issuance $9261,676197$

minority interests in operation of consolidated subsidiaries $(68)(727)(540)$

purchased in$-$process research and development $17,300\_\_$

other non$-$cash charge $\_21,245\_$

changes in assets and liabilities:

Accounts receivables, net $($$$13,616)($$$5,963)($$$4,269)$

prepaid expenses $2,144(6,110)(386)$

accounts payable $5152,4251,386$

accrued expense and other current liabilities $16,6887,4044,393$

deferred revenue $33,2102,9831,665$

due to related parties $(451)330948$

net cash provided by $($used in$)$ operating activities $($A$)$ $$110,278$ $$480($$$2,394)$

cash flow from investing activities

acquisition of property and equipment $(11,911)(6,722)(3,442)$

cash acquired in acquisition $199\_\_$

purchase of marketable securities $(471,135)(58,753)(115,247)$

proceeds from sale and maturities of marketable securities $158,35086,67843,240$

other investments $(5,445)(1,649)(729)$

net cash provided by $($used in$)$ investing activities $($B$)(329,942)19,554(76,178)$

cash flow from financing activities

proceeds from issuance of common stock, net $280,6797,51642,484$

proceeds from issuance of convertible preferred stock $\_\_63,750$

proceeds from minority investors $6009991,050$

other $\_1,106(128)$

net cash provided by $($used in$)$ financing activities $($ C$)281,2799,621107,156$

effect of exchange of cash and cash equivalents $($D$)288(380)(63)$

net change in cash and cash equivalents $($A$+$B$+$C$+$D$)$ $$61,903$ $$29,275$ $$28,521$

cash and cash equivalents at beginning of year $63,57134,2965,775$

cash and cash equivalents at the end of year $$125,474$ $$63,571$ $$34,296$

Required:

a$.$ Yahoo!$$s operations did not produce significant cash flows during year $6$ and year $7.$ How

does Yahoo! Finance its growth in the absence of sufficient operating cash flows?

b$.$ What appears to drive the operating cash flows of Yahoo!?

c$.$ Yahoo! engages in purchases and sales of marketable securities$.$ Why do you believe Yahoo!

Pursue this activity?

d$.$ Yahoo! Reports $$33\mathrm{.}21$ million of deferred revenue. Based on your understanding of

Yahoo!$$s operations, what do you believe this amount represents?