Alonzo and Mika, two students in a financial statement analysis class, were reviewing financial statements for Facebook, one of the world’s largest social-media companies. Alonzo noted that the company did not report any dividends in the financing activity section of the statement of cash flows and said, “I have heard that Facebook is a very profitable company. If it’s so profitable, why isn’t it paying any dividends?” Mika wasn’t convinced that Alonzo was looking in the right place for dividends but didn’t say anything.

Alonzo continued his analysis and noted, “Revenues for Facebook are up nearly $15 billion over the previous year, while net income is up almost $2 billion compared to last year, and the company reported over $38 billion in operating cash flows.” At that point, Mika noted that the statement of cash flows reported that Facebook had spent almost $34 billion to purchase marketable securities and $6 billion to repurchase stock. She was confused about whether Facebook was in a good position to pay dividends or not.

Required:
1. Is Mika’s concern that Alonzo is looking at the wrong section of the statement of cash flows justified?
2. Is there a right time for a company like Facebook to start paying a dividend?