The financial statement for urban outfitters for the fiscal year ending Jan 2012

Question

The financial statement for urban outfitters for the fiscal year ending Jan 2012 can be found on google

CP12-2 Finding Financial Information LO12-2, 12-4, 12-6 Refer to the financial statements of Urban Outfitters given in Appendix C at the end of this book. Required: 1. Does Urban Outfitters use the direct or indirect method to report cash flows from operating activities? 2. What amount of tax payments did the company make during the most recent reporting year? (Hint: The statement of cash flows may be helpful to answer this question.) 3. Explain why the “share-based compensation” and “depreciation and amortization” items were added in the reconciliation of net income to net cash provided by operating activities. 4. Has the company paid cash dividends during the last three years? How do you know? 5. What was free cash flow for the year ended January 31, 2012? (Dollars in thousands.) Cash Flows from Free Cash Flow:

Explanation / Answer

1)Urban Outfitters use the Indirect method to report cash flows from operating activities--- In their consolidated Cash flow statement they   have started with the net income,made adjustments for all non-cash items and then for all cash items( changes in working capital), in that order,to get OCF whereas under the Direct method, cash receipts & cash payments for operating activities are netted out to arrive at the OCF 2) Income Tax paid for year ended 31/1/2012 is $ 120,847 3) Since "Share based compensation" and "depreciation and amorization" are non cash items, ie. there is no outflow of cash, they are added back to net income -to get OCF 4) The Company has not paid any cash dividends during the last three years There are no such entries in the cash flow statement --- under the heading operating activities (under indirect method) 5) Free cash flow= Operating cash flow - Capital expenditure ie. Cash flow from operating activities and investing activities ie.282702 + 55292= 337994

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