Using the above operating activities for Costco Corporation, answer the following question:
Compare the net cash provided by operations with the net income for each of the years presented in the statement of cash flows above. How do the net cash flows from operating activities compare to the net income? Have the net cash flows from operating activities been increased or decreased over time?
Thanks!
Homework Answers
There's a useful ratio we can deploy against the income
statement to determine the quality of a firm's reported earnings:
Operating Cash Flow (CFFO) to Net Income.
As the name implies, the ratio is calculated by dividing a
company's operating cash flow by its net income. Operating
activities are the actions a company takes pursuant to its normal
business activities.
When a company's CFFO to net income ratio is above 1, it is indicative of a strong ability to fund it's activities through generation of operating cash flow. In other words, a higher ratio means that the firm's earnings are of a higher quality, and that it will not need to raise money any time soon to fund its operations.
Here are the calculations for the CFFO to Net Income Ratio:
2014: 3.98/2.09 = 1.90
2015: 4.29/2.41 = 1.78
2016: 3.29/2.38 = 1.38
2017: 6.73/2.71 = 2.48
2018: 5.77/3.18 = 1.81
Thus, the ratio has fluctuated downwards for the first three years. 2017 seems to have been a very good year for the company in terms of operations and the earnings quality was very high. That ratio seems to have normalized again in 2018.
The net cash flow from operating activities have fluctuated greatly in the period shown, increasing from 2014 to 2015, then reducing in 2016, before bouncing back up again strongly in 2017 and then normalizing in 2018 to a healthy level.
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Using the above operating activities for Costco Corporation,
answer the following question:
Compare the net cash...
The income statement and the cash flows from the operating activities section of the statement of...
The income statement and the cash flows from the operating activities section of the statement of cash flows are provided below for Syntric Company. The merchandise inventory account balance neither increased nor decreased during the reporting period. Syntric had no liability for insurance, deferred income taxes, or interest at any time during the period. $ 273.2 (179.8) 93.4 (65.7) SYNTRIC COMPANY Income Statement For the Year Ended December 31, 2021 ($ in thousands) Sales Cost of goods sold Gross margin...
Cemptex Corporation prepares its statement of cash flows using the indirect method to report operating activities....
Cemptex Corporation prepares its statement of cash flows using the indirect method to report operating activities. Net Income for the 2021 fiscal year was $704,000. Depreciation and amortization expense of $83,000 was included with operating expenses in the income statement. The following information describes the changes in current assets and liabilities other than cash: look Decrease in accounts receivable Increase in inventory Increase in prepaid expenses Increase in salaries payable Decrease in income taxes payable $38,000 10.800 10,100 11,600 14,000...
2. In cash from operating activities, what was the total cash from operating activities for the...
2. In cash from operating activities, what was the total cash
from operating activities for the same period?
6 Months Ended Consolidated Statements of Cash Flows-USD (S) $ in Thousands Jun. 30, 2018 Jun. 30, 2017 CASH FLOWS FROM OPERATING ACTIVITIES: Net income Adjustments to reconcile net income to net cash provided by operating actvities: Depreciation and amortization Depreciation and amortization-marketing and reservation system Franchise agreement acquisition cost amortization Loss (gain) on disposal of assets Provision for bad debts, net...
The income statement and the cash flows from the operating activities section of the statement of...
The income statement and the cash flows from the operating activities section of the statement of cash flows are provided below for Syntric Company. The merchandise inventory account balance neither increased nor decreased during the reporting period. Syntric had no liability for insurance, deferred income taxes, or interest at any time during the period. SYNTRIC COMPANY Income Statement For the Year Ended December 31, 2018 ($ in 8005) Sales $ 271.7 Cost of goods sold (168.8) Gross margin 102.9 Salaries...
Cemptex Corporation prepares its statement of cash flows using the indirect method to report operating activities....
Cemptex Corporation prepares its statement of cash flows using the indirect method to report operating activities. Net income for the 2018 fiscal year was $704,000. Depreciation and amortization expense of $83,000 was included with operating expenses in the income statement. The following information describes the changes in current assets and liabilities other than cash: Decrease in accounts receivable Increase in inventories Increase prepaid expenses Increase in salaries payable Decrease in income taxes payable $38,000 10,800 10,100 11,600 14,000 Required: Prepare...
Cemptex Corporation prepares its statement of cash flows using the indirect method to report operating activities....
Cemptex Corporation prepares its statement of cash flows using the indirect method to report operating activities. Net income for the 2021 fiscal year was $694,000. Depreciation and amortization expense of $81,000 was included with operating expenses in the income statement. The following information describes the changes in current assets and liabilities other than cash: Decrease in accounts receivable $36,000 Increase in inventory 10,600 Increase in prepaid expenses 9,900 Increase in salaries payable 11,400 Decrease in income taxes payable 12,000 Required:...
Cemptex Corporation prepares its statement of cash flows using the indirect method to report operating activities....
Cemptex Corporation prepares its statement of cash flows using the indirect method to report operating activities. Net income for the 2021 fiscal year was $659,000. Depreciation and amortization expense of $94,000 was included with operating expenses in the income statement. The following information describes the changes in current assets and liabilities other than cash: Decrease in accounts receivable Increase in inventory Increase in prepaid expenses Increase in salaries payable Decrease in income taxes payable $ 29,000 9,900 9,200 10,700 18,000...
Cemptex Corporation prepares its statement of cash flows using the indirect method to report operating activities....
Cemptex Corporation prepares its statement of cash flows using the indirect method to report operating activities. Net income for the 2021 fiscal year was $724,000. Depreciation and amortization expense of $87,000 was included with operating expenses in the income statement. The following information describes the changes in current assets and liabilities other than cash: Decrease in accounts receivable Increase in inventory Increase in prepaid expenses Increase in salaries payable Decrease in income taxes payable $42,000 11,200 10,500 12,000 18,000 Required:...
Cemptex Corporation prepares its statement of cash flows using the indirect method to report operating activities....
Cemptex Corporation prepares its statement of cash flows using the indirect method to report operating activities. Net income for the 2021 fiscal year was $684,000. Depreciation and amortization expense of $99,000 was included with operating expenses in the income statement. The following information describes the changes in current assets and liabilities other than cash: Decrease in accounts receivable $ 34,000 Increase in inventory 10,400 Increase in prepaid expenses 9,700 Increase in salaries payable 11,200 Decrease in income taxes payable 10,000...
Cemptex Corporation prepares its statement of cash flows using the indirect method to report operating activities....
Cemptex Corporation prepares its statement of cash flows using the indirect method to report operating activities. Net income for the 2021 fiscal year was $639,000. Depreciation and amortization expense of $90,000 was included with operating expenses in the income statement. The following information describes the changes in current assets and liabilities other than cash: Decrease in accounts receivable Increase in inventory Increase in prepaid expenses Increase in salaries payable Decrease in income taxes payable $25,000 9,500 8,800 10,300 14,000 Required:...
The income statement and the cash flows from the operating activities section of the statement of cash flows are provided below for Syntric Company. The merchandise inventory account balance neither increased nor decreased during the reporting period. Syntric had no liability for insurance, deferred income taxes, or interest at any time during the period. $ 273.2 (179.8) 93.4 (65.7) SYNTRIC COMPANY Income Statement For the Year Ended December 31, 2021 ($ in thousands) Sales Cost of goods sold Gross margin...
Cemptex Corporation prepares its statement of cash flows using the indirect method to report operating activities. Net Income for the 2021 fiscal year was $704,000. Depreciation and amortization expense of $83,000 was included with operating expenses in the income statement. The following information describes the changes in current assets and liabilities other than cash: look Decrease in accounts receivable Increase in inventory Increase in prepaid expenses Increase in salaries payable Decrease in income taxes payable $38,000 10.800 10,100 11,600 14,000...
2. In cash from operating activities, what was the total cash
from operating activities for the same period?
6 Months Ended Consolidated Statements of Cash Flows-USD (S) $ in Thousands Jun. 30, 2018 Jun. 30, 2017 CASH FLOWS FROM OPERATING ACTIVITIES: Net income Adjustments to reconcile net income to net cash provided by operating actvities: Depreciation and amortization Depreciation and amortization-marketing and reservation system Franchise agreement acquisition cost amortization Loss (gain) on disposal of assets Provision for bad debts, net...
The income statement and the cash flows from the operating activities section of the statement of cash flows are provided below for Syntric Company. The merchandise inventory account balance neither increased nor decreased during the reporting period. Syntric had no liability for insurance, deferred income taxes, or interest at any time during the period. SYNTRIC COMPANY Income Statement For the Year Ended December 31, 2018 ($ in 8005) Sales $ 271.7 Cost of goods sold (168.8) Gross margin 102.9 Salaries...
Cemptex Corporation prepares its statement of cash flows using the indirect method to report operating activities. Net income for the 2018 fiscal year was $704,000. Depreciation and amortization expense of $83,000 was included with operating expenses in the income statement. The following information describes the changes in current assets and liabilities other than cash: Decrease in accounts receivable Increase in inventories Increase prepaid expenses Increase in salaries payable Decrease in income taxes payable $38,000 10,800 10,100 11,600 14,000 Required: Prepare...
Cemptex Corporation prepares its statement of cash flows using the indirect method to report operating activities. Net income for the 2021 fiscal year was $694,000. Depreciation and amortization expense of $81,000 was included with operating expenses in the income statement. The following information describes the changes in current assets and liabilities other than cash: Decrease in accounts receivable $36,000 Increase in inventory 10,600 Increase in prepaid expenses 9,900 Increase in salaries payable 11,400 Decrease in income taxes payable 12,000 Required:...
Cemptex Corporation prepares its statement of cash flows using the indirect method to report operating activities. Net income for the 2021 fiscal year was $659,000. Depreciation and amortization expense of $94,000 was included with operating expenses in the income statement. The following information describes the changes in current assets and liabilities other than cash: Decrease in accounts receivable Increase in inventory Increase in prepaid expenses Increase in salaries payable Decrease in income taxes payable $ 29,000 9,900 9,200 10,700 18,000...
Cemptex Corporation prepares its statement of cash flows using the indirect method to report operating activities. Net income for the 2021 fiscal year was $724,000. Depreciation and amortization expense of $87,000 was included with operating expenses in the income statement. The following information describes the changes in current assets and liabilities other than cash: Decrease in accounts receivable Increase in inventory Increase in prepaid expenses Increase in salaries payable Decrease in income taxes payable $42,000 11,200 10,500 12,000 18,000 Required:...
Cemptex Corporation prepares its statement of cash flows using the indirect method to report operating activities. Net income for the 2021 fiscal year was $639,000. Depreciation and amortization expense of $90,000 was included with operating expenses in the income statement. The following information describes the changes in current assets and liabilities other than cash: Decrease in accounts receivable Increase in inventory Increase in prepaid expenses Increase in salaries payable Decrease in income taxes payable $25,000 9,500 8,800 10,300 14,000 Required:...
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