Investors often evaluate the investing activities section of the statement of cash flows to measure the future growth of a company. A company that is investing in plant assets is more likely to generate sales growth and earn a higher level of net income. 

Instructions: 

1. Use the statement of cash flows on page B-9 of Appendix B in this textbook. Identify the cash expended on new property and equipment from 2004 to 2006. 

2. Does Costco's statement of cash flows support the reported growth in the number of warehouses?

Data from page B-9 of Appendix B

Transcribed Image Text:

COSTCO WHOLESALE CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands) CASH FLOWS FROM OPERATING ACTIVITIES Fiscal Year Ended September 3, 2006 August 28, 2005 August 29, 2004 Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization Other $ 1,103,215 $ 1,063,092 $ 882,393 515,285 481,838 (5,888) (11,186) 440,721 74 Accretion of discount on zero coupon notes 4,828 11,855 18,421 Stock-based compensation 107,397 67,937 36,508 Undistributed equity earnings in joint ventures (28,180) (26,459) Net loss/(gain) on sale of property and equipment and other 5,867 5,139 (23,517) (9,122) Provision for impaired assets 3,893 Change in deferred income taxes (38,311) (64,690) 32,496 Excess tax benefit from exercise of stock options (31,296) Change in receivables, other current assets, deferred income, accrued and other current liabilities 416,112 78,118 762,739 Increase in merchandise inventories (500,602) (315,793) Increase in accounts payable. 278,863 482,217 (256,438) 211,990 Total adjustments 724,075 712,869 1,213,872 Net cash provided by operating activities 1,827,290 1,775,961 2,096,265 CASH FLOWS FROM INVESTING ACTIVITIES Additions to property and equipment... (1,212,567) (995,431) (705,620) Proceeds from the sale of property and equipment 15,740 19,432 55,400 Investment in unconsolidated joint venture (15,000) (15,000) Purchase of minority interests. (3,961) Purchases of short-term investments (2,598,355) (3,741,429) (95,153) (387,223) Maturities of short-term investments Sales of short-term investments Change in other assets and other, net Net cash used in investing activities 2,424,503 263,288 (31,169) (1,153,560) (2,051,513) 2,401,248 267,640 83,278 15,988 3,355 (1,045,963)