Access the financial statements of Bombardier Inc. for the year ended January 31, 2010, and January 31, 2008, from the company’s website or SEDAR (www.sedar.com).
Changes in non-cash working capital items can have a significant impact on operating cash flows. Using the financial statements, answer the following questions.
(a) What does Bombardier do? When is revenue and related costs recognized? Comment on the timing of revenue and expenses, and cash receipts and payments related to operating activities.
(b) What were Bombardier’s net earnings from 2007 to 2010? What were the operating cash flow amounts for the same periods? Calculate the difference between net income and operating cash flows for each year. In which years was the operating cash flow higher or lower than net earnings? Calculate the year over year percentage changes in net earnings. Calculate the year over year percentage changes in operating cash flows. Comment on these differences in dollar amounts and year over year percentage changes.
(c) What is causing these differences in net income and operating cash flows to occur? Highlight significant differences and explain why these arise.
(d) Comment on the ability to predict cash flows for this company. Which approach in preparing operating cash flows (direct or indirect) would be most useful to potential investors?