a) Compare The Bay's operating cash flow (OCF) of 2006 with that of 2005, what do you think is the major contributor to 2006's positive OCF? Briefly comment on The Bay's cash flow status.

b) Calculate The Bay's 2006 operating cashflow, assuming the change of "Other accounts payable and accrued liabilities" is -56,158 rather than +139,012?

c) In the year of 2006, The Bay securitized 900,000 of their credit card receivables through the use of Variable Interest Entity (VIE). The Bay's managers decide to not consolidate this VIE, although The Bay is the primary beneficiary of this VIE. How would this decision affect the debt-to-equity ratio, operating cash flow and current ratio?

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Consolidated Statements of Cash Flows Years ended January 31 (thousands of dollars) Operating activities Earnings (loss) before income taxes Net cash income taxes Items not affecting cash flows: Amortization Goodwill impairment Pension contribution Pension expense Net loss on sale of credit card receivables Accretion of convertible debentures Gain on sale of fixed assets Net change in operating working capital Net cash inflow from operating activities Investing activities Capital expenditures Disposition of fixed assets Other assets Miscellaneous Net cash outflow for investing activities Net cash inflow before financing activities Financing activities Long-term debt: Redeemed Increase (decrease) in short-term borrowings Capital stock: Common shares issued Common shares purchased for cash and cancelled Dividends paid - common shares Net cash outflow for financing activities Increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year January 31 (thousands of dollars) Short-term deposits Less: restricted funds Cash and cash equivalents at end of year (See accompanying notes to the Consolidated Financial Statements) Notes 15 23 6 3 13 D 10 10 2006 (202,057) 8,807 189,163 137,690 (49,969) 8,250 348 2,855 183,896 278,983 (228,036) 5,301 (18,562) 8,971 (232,326) 46,657 2,155 (25,006) (184,567) (137,910) 240,800 102,890 2005 2006 117,426 (14,536) 102,890 83,686 (18,454) (101,685) (126,077) (60,031) 123,401 190,669 5,500 4,373 2,601 (11,835) 10,974 267,514 (189,982) 60,110 (12,068) (10,879) (152,819) 114,695 371 (148) (24,963) (27,416) 87,279 153,521 240,800 2005 254,908 (14,108) 240,800 Consolidated Statements of Cash Flows Years ended January 31 (thousands of dollars) Operating activities Earnings (loss) before income taxes Net cash income taxes Items not affecting cash flows: Amortization Goodwill impairment Pension contribution Pension expense Net loss on sale of credit card receivables Accretion of convertible debentures Gain on sale of fixed assets Net change in operating working capital Net cash inflow from operating activities Investing activities Capital expenditures Disposition of fixed assets Other assets Miscellaneous Net cash outflow for investing activities Net cash inflow before financing activities Financing activities Long-term debt: Redeemed Increase (decrease) in short-term borrowings Capital stock: Common shares issued Common shares purchased for cash and cancelled Dividends paid - common shares Net cash outflow for financing activities Increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year January 31 (thousands of dollars) Short-term deposits Less: restricted funds Cash and cash equivalents at end of year (See accompanying notes to the Consolidated Financial Statements) Notes 15 23 6 3 13 D 10 10 2006 (202,057) 8,807 189,163 137,690 (49,969) 8,250 348 2,855 183,896 278,983 (228,036) 5,301 (18,562) 8,971 (232,326) 46,657 2,155 (25,006) (184,567) (137,910) 240,800 102,890 2005 2006 117,426 (14,536) 102,890 83,686 (18,454) (101,685) (126,077) (60,031) 123,401 190,669 5,500 4,373 2,601 (11,835) 10,974 267,514 (189,982) 60,110 (12,068) (10,879) (152,819) 114,695 371 (148) (24,963) (27,416) 87,279 153,521 240,800 2005 254,908 (14,108) 240,800

Answer rating: 100% (QA)

a To compare The Bays operating cash flow OCF between 2006 and 2005 we need to look at the net cash inflow from operating activities In 2006 the net cash inflow from operating activities is 183896000 ... View the full answer