Vonage Holding Corporation provides telecommunication services using voice over Internet technology. It began operations in 2002 and has never made a profit. By the end of 2008 it had cumulative losses of $1 billion. Vonage€™s statements of cash flows for 2006, 2007, and 2008 follow.

Required
a. This chapter explained that many companies that report net losses on their earnings statements report positive cash flows from operating activities. How does Vonage€™s net income for each year compare to its cash flows from operating activities?
b. Based only on the information in the statements of cash flows, does Vonage appear to be improving its position in the telecommunications business? Explain.
c. In 2008 Vonage paid off over $250 million in debt. Where did it get the funds to repay this debt?
d. All things considered, based on the information in its statements of cash flows, did Vonage€™s cash position appear to be improving ordeteriorating?

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VONAGE HOLDINGS CORP. Statements of Cash Flows (amounts in thousands) For the Years Ended 2006 2008 2007 Cash Flows from Operating Activities Net income (loss) $ (64,576) $(267,428) 33,574 2,144 ${338,573) 22,709 45,796 2,816 30,570 108 Depreciation and amortization and impairment charges Amortization of intangibles Loss on early extinguishment of notes 968 42 32 Beneficial conversion on interest in kind on convertible notes 882 Amortization of discount on debt 4,002 3,014 846 Accrued interest 207 1,852 2,799 4,689 266 Allowance for doubtful accounts 1,519 Allowance for obsolete inventory Amortization of deferred financing costs Amortization of debt-related costs 1,441 1,999 3,237 continued For the Years Ended 2008 2007 2006 283 7,542 12 320 26,980 (49) (10,196) (10,133) (6,218) (21,053) Loss (gain) on disposal of fixed assets Share-based expense Other adjustments 12,238 2,028 7,472 (282) 13,322 (5,296) 2,196 (6,185) (10,796) Accounts receivable Inventory Prepaid expenses and other current assets Deferred customer acquisition costs Due from related parties 2 74 32 (7,498) (22,029) (12,738) (10,124) (81) (2,966) (77,770) 20,509 (294) 42,407 62,281 34,181 Other assets Accounts payable Accrued expenses Deferred revenue (5,321) 655 Other liability 23,046 (270,926) (188,898) Net cash flows from operating activities Cash Flows from Investing Activities Capital expenditures Purchase of intangible assets Purchase of marketable securities (11,386) (560) (21,375) 101,317 (26,530) (980) (20,386) (5,500) (236,875) 446,949 (21,346) (45,336) (5,268) (639,707) 484,116 (4,060) Maturities and sales of marketable securities Acquisition and development of software assets Decrease (increase) in restricted cash (31,385) 131,457 (543) (210,798) Net cash flows from investing activities 40,486