Several years ago the Boeing Company reported a profit increase over the previous year of about 18 percent. Net cash flows due to operating activities, on the other hand, dropped sig¬ nificantly to a negative $680.1 million. REQUIRED:

a. Boeing reported depreciation of approximately $300 million during the year. Would this account for the fact that net cash flows due to operating activities were far below earnings? Why or why not?

b. What other explanations might account for the difference?

c. During the same year, the market price of Boeing stock fell from $44 1/8 to $19 3/4, a drop of approximately 55 percent. Provide several reasons why this stock price decline may have occurred.