Chapter 11, Problem 1FA

Financial Analysis

Purpose: To help to familiarize you with the financial reporting of a real company in order to further your understanding of the chapter material you are learning.

This case focuses on the cash flows of Columbia Sportswear. Recall that inflows and outflows of cash are classified as operating activities, investing activities, or financing activities. The statement of cash flows presents cash flows from each of these three activities. It is. therefore, important to understand the information provided in this revealing financial statement. The statement of cash flows and additional related information for Columbia Sportswear are disclosed in its annual report found in Appendix A.

Requirements

1. 1. Look at the operating activities section of the statements of cash flows. Compare the net cash provided by operating activities to the net income for each of the three years presented. Are the net income amounts reported on the cash flow statement the same as on the income statement? How does the net cash flow provided by operations compare to the net income? Why do they differ? Is this difference good or bad? Have the net cash flows provided by operations been increasing or decreasing? Why are depreciation and amortization added back each year?
2. 2. Look at the investing activities section of the statements of cash flows. What has created the largest inflows and outflows of cash related to investing activities in each of the three years presented? Can you determine whether Columbia Sportswear has been spending money to purchase more property and equipment? Did investing activities provide or use cash for the three years presented?
3. 3. Look at the financing activities section of the statements of cash flows. Did financing activities provide or require cash for the three fiscal years presented? What is the significance of this information? What are the stock repurchase and dividend trends? What was the largest item in the financing section for the most recent year?
4. 4. How do you feel about the overall sufficiency of cash flows? Does the net cash provided from operations cover the net cash required for investing activities for each of the three years? Does the net cash provided from operations cover the net cash required for financing activities for each of the three years?
5. 5. What was the net change in cash and cash equivalents for the most recent fiscal year? Does the ending cash amount agree with the cash and cash equivalents reported on the balance sheet? Do you have any other observations about the statement of cash flows?