Balance Sheet and Ormiston Essay

Submitted By vampgirl502
Words: 743
Pages: 3

Candela Corporation Case
Tina Marion
Financial Reporting
December 21, 2014
Crag Hanson

The statement of cash flows is a very important financial statement that lets you get an inside look at a company’s finances. It provides information about how a company is really doing financially, as well as information that cannot be found on other financial statements. Starting with the cash flows from operating activities section, we can see that the net income for Candela Corp has increased over the past three years. They have been able to go from losing $2,154 in 2002 to making $6,814 in 2003 to making $8,119 in 2004 (Fraser & Ormiston, 2007). When we look at the cash from operating activities, it shows a much different picture. In 2002, the company lost $7,071 to operating activities, in 2003 they made $11,655 and in 2004 they made $1,132 (Fraser & Ormiston, 2007). When we compare this to the net income we see there are substantial differences.
The reason that the loss for 2002 was so much higher than the net income was because of the loss of $3,525 to accounts receivable, the loss of $1,661 to inventories, and the loss of $3,069 to accounts payable (Fraser & Ormiston, 2007). This resulted in the difference of $4,917 between the net income loss of $2,154 and the cash from operating activities loss of $7,071 (Fraser & Ormiston, 2007).
The reason for the gain in 2003 is mostly due to a gain of $4,168 in payable income tax (Fraser & Ormiston, 2007). This resulted in the difference of $4,841 between the net income of $6,814 and the cash from operating activities gain of $11,655 (Fraser & Ormiston, 2007). The reason for the substantial loss in 2004 is due to a loss of $7,663 in accounts receivable, a loss of $2,134 in inventories, and a loss of $2,550 in other current assets (Fraser & Ormiston, 2007). This resulted in the difference of $6,987 between the net income of $8,119 and the cash from operating activities gain of $1,132 (Fraser & Ormiston, 2007).
Moving to the next section brings us to the cash flows from investing activities. We see that for this company, there is only one item in this section, which is the purchase of property, plant and equipment. In 2002, the company lost $1,058 to the purchase of property, plant and equipment, in 2003 they lost $1,227 and in 2004 they lost $685 (Fraser & Ormiston, 2007). They have slowly reduced their loss in this section over the past three years, and most likely will have no loss or even a gain in 2005.
Moving to the next section brings us to the cash flow from financing activities. We see an increase in this section too. The cash from financing activities in 2002 was a loss of $5,141, in 2003 was a gain of $176, and in 2004 was a gain of $4,707 (Fraser & Ormiston, 2007). The reason for such a loss in 2002 was because of a loss of $5,215 in repurchasing treasury stock (Fraser & Ormiston, 2007). In 2003 they were able to stay positive, but just barely. This is because of a loss of $3,330 in long-term debt payments and a loss of $1,114 in repayments on credit, which was offset just barely by a gain of $4,620 from the issuance of…