Question

Refer to Exhibit 6.35 for Fierce Fighters Corporation, which shows excerpts from its Statements of Cash Flows, with cash flow from operations presented with the indirect method, for three recent years. We use these years to illustrate a period of successively decreasing cash flows from operations. The columns labeled Change and shaded purple do not appear in the original.
a. Using Exhibit 6.35, write a short (no more than 50 words) explanation of why Fierce
Fighters’ cash flow from operations declined by about 20% per year between 2011 and 2012 and then again between 2012 and 2013. If you cannot explain, then suggest why that might be.
Exhibit 6.35


b. Now refer to Exhibit 6.36 for Fierce Fighters, which shows excerpts from its Statements of Cash Flows, with cash flow from operations presented with the direct method, for the same three years as in part a. Write a short (no more than 50 words) explanation of why Fierce Fighter’s cash flow from operations declined by about 20% per year between 2011 and 2012 and then again between 2012 and 2013. If you cannot explain, then suggest why that might be.
c. Which method of presenting cash flow from operations do you find easier tointerpret?


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  • CreatedMarch 04, 2014
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