5. (TCO C) Please review the following real-world Hewlett Packard Statement of C
ID: 2501914 • Letter: 5
Question
5. (TCO C) Please review the following real-world Hewlett Packard Statement of Cash flows and address the two questions below.
Required: 1: Please calculate the percentage increase or decrease in cash for the total line of the operating, investing, and financing sections bolded above and explain the major reasons for the increase or decrease for each of these sections. 2: Please calculate the free cash flow for 2012 and explain the meaning of this ratio. (Points : 36)
Cash flow from operating activities In millions In millions For the year ended 2012 For the year ended 2011 Net (loss) earnings $(12,650) $7,074 Depreciation and amortization 5,095 4,984 Impairment of goodwill and purchased intangible assets 18,035 885 Stock-based compensation expense 635 685 Provision for doubtful accounts 142 81 Provision for inventory 277 217 Restructuring charges 2,266 645 Deferred taxes on earnings (711) 166 Excess tax benefit from stock-based competition (12) (163) Other, net 265 (46) Accounts and financing receivables 1,269 (227) Inventory 890 (1,252) Accounts payable (1,414) 275 Taxes on earnings (320) 610 Restructuring (840) (1,002) Other assets and liabilities (2,356) (293) Net cash provided by operating activities 10,571 12,639 Cash flows from investing activities: Investment in property, plant, and equipment (3,706) (4,539) Proceeds from sale of property, plant, and equipment 617 999 Purchases of available-for-sale securities and other investments (972) (96) Maturities and sales of available-for-sale securities and other investment 662 68 Payments in connection with business acquisitions, net of cash acquired (141) (10,480) Proceeds from business divestiture, net 87 89 Net cash used in investing activities (3,453) (13,959) Cash flow from financing activities: (Payments) issuance of commercial paper and notes payable, net (2,775) (1,270) Issuance of debt 5,154 11,942 Payment of debt (4,333) (2,336) Issuance of common stock under employee stock plans 716 896 Repurchase of common stock (1,619) (10,117) Excess tax benefit from stock-based compensation 12 163 Cash dividends paid (1,015) (844) Net cash used in financing activities (3,860) (1,566) Increase (decrease) in cash and cash equivalents 3,258 (2,886) Cash and cash equivalents at beginning of period 8,043 10,929 Cash and cash equivalents at end of period $11,301 $8,043Explanation / Answer
Statement of Cash flow 2012 2011 Increase / Decrease Percentage Net cash provided by operating activities 10571 12639 -2068 -16.36% Net cash used in investing activities -3453 -13959 10506 -75.26% Net cash used in financing activities -3860 -1566 -2294 146.49% Net cash provided by operating activities Decreased mainly due to increase in other assets and liability and Account Payable , it may be further noted that current year loss is mainly because of impairment of goodwill which does no have an impact on operating Cash flow Net cash provided by operating activities Last Year there was a Payments in connection with business acquisitions,amount to 10480 hence last year cash flow out flow was more compared to 2012 Net cash used in financing activities due to Increase inRe payments of long term debt and dividends payment in 2012 as compared to 2011
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