Interpreting the Statement of Cash Flows. The Coca-Cola Company (Coca-Cola) manufactures and markets a variety of beverages. Exhibit 3.16 presents a statement of cash flows for Coca-Cola for three years.RequiredDiscuss the relations between net income and cash flow from operations and among cash flows from operating, investing, and financing activities for the firm over the three-year period. Identify characteristics of Coca-Cola’s cash flows that you would expect for a mature company.Please explain without copying from another source! Exhibit 3.16 The Coca-Cola Company Statement of Cash Flows (amounts inmillions) (Problem 3.18)Year Ended December 31,Year 3Year 2Year 1OPERATING ACTIVITIES$ 5,807$ 5,981$ 5,080Net incomeDepreciation and amortizationStock-based compensation expense1,2281,163938266313324Deferred income taxes(360)109(35)Equity income or loss, net of dividendsForeign currency adjustmentsGains on sales of assets, including bottling interestsOther operating charges1,128(452)124(42)52(130)(244)(303)209166159Other items15399233Net change in operating assets and liabilitiesNet Cash Provided by Operating Activities(688)$ 7,571(615)$ 7,150$ 5,957INVESTING ACTIVITIESAcquisitions and investments, principally beverage and bottlingcompanies and trademarks$ (759)$ (901)$(5,653)Purchases of other investments(240)(99)(82)Proceeds from disposals of bottling companies and otherinvestments479448640Purchases of property, plant, and equipmentProceeds from disposals of property, plant, and equipmentOther investing activitiesNet Cash Used in Investing Activities(1,968)(1,648)(1,407)129239112(4)$(2,363)(6)$(6,719)(62)$(1,700)FINANCING ACTIVITIESIssuances of debt$ 4,337$ 9,979$ 617Payments of debt(4,308)(5,638)(2,021)Issuances of stock5861,619148Purchases of stock for treasury(1,079)(1,838)(2,416)Dividends(3,521)$(3,985)$ (615)(3,149)$ 973$ 249(2,911)Net Cash Provided by (Used in) Financing ActivitiesEffect of exchange rate changes on cash and cash equivalents$(6,583)$ 65CASH AND CASH EQUIVALENTS$ 1,653$ 6084,093$ 4,701$(2,261)Net Increase (Decrease) During the YearBalance at beginning of year2,4404,701Balance at End of Year$ 4,093$ 2,440Source: The Coca-Cola Company, Form 10-K for the Fiscal Year Ended 2008.

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Chapter12: The Statement Of Cash Flows

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Interpreting the Statement of Cash Flows. The Coca-Cola Company (Coca-Cola) manufactures and markets a variety of beverages. Exhibit 3.16 presents a statement of cash flows for Coca-Cola for three years.

Required

Discuss the relations between net income and cash flow from operations and among cash flows from operating, investing, and financing activities for the firm over the three-year period. Identify characteristics of Coca-Cola’s cash flows that you would expect for a mature company.

Please explain without copying from another source!

Exhibit 3.16 The Coca-Cola Company Statement of Cash Flows (amounts in
millions) (Problem 3.18)
Year Ended December 31,
Year 3
Year 2
Year 1
OPERATING ACTIVITIES
$ 5,807
$ 5,981
$ 5,080
Net income
Depreciation and amortization
Stock-based compensation expense
1,228
1,163
938
266
313
324
Deferred income taxes
(360)
109
(35)
Equity income or loss, net of dividends
Foreign currency adjustments
Gains on sales of assets, including bottling interests
Other operating charges
1,128
(452)
124
(42)
52
(130)
(244)
(303)
209
166
159
Other items
153
99
233
Net change in operating assets and liabilities
Net Cash Provided by Operating Activities
(688)
$ 7,571
(615)
$ 7,150
$ 5,957
INVESTING ACTIVITIES
Acquisitions and investments, principally beverage and bottling
companies and trademarks
$ (759)
$ (901)
$(5,653)
Purchases of other investments
(240)
(99)
(82)
Proceeds from disposals of bottling companies and other
investments
479
448
640
Purchases of property, plant, and equipment
Proceeds from disposals of property, plant, and equipment
Other investing activities
Net Cash Used in Investing Activities
(1,968)
(1,648)
(1,407)
129
239
112
(4)
$(2,363)
(6)
$(6,719)
(62)
$(1,700)
FINANCING ACTIVITIES
Issuances of debt
$ 4,337
$ 9,979
$ 617
Payments of debt
(4,308)
(5,638)
(2,021)
Issuances of stock
586
1,619
148
Purchases of stock for treasury
(1,079)
(1,838)
(2,416)
Dividends
(3,521)
$(3,985)
$ (615)
(3,149)
$ 973
$ 249
(2,911)
Net Cash Provided by (Used in) Financing Activities
Effect of exchange rate changes on cash and cash equivalents
$(6,583)
$ 65
CASH AND CASH EQUIVALENTS
$ 1,653
$ 608
4,093
$ 4,701
$(2,261)
Net Increase (Decrease) During the Year
Balance at beginning of year
2,440
4,701
Balance at End of Year
$ 4,093
$ 2,440
Source: The Coca-Cola Company, Form 10-K for the Fiscal Year Ended 2008.

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