5-57 Statement of Cash Flows, Direct Method

OBJECTIVE 5

The J.M. Smucker Company had net sales of $4,826 million from selling products such as jam (Smuckers), peanut butter (Jif), and vegetable oils (Crisco) for the year ending April 30, 2011. The income statement showed operating expenses of $4,042 million, other expenses of $67 million, and income taxes of $238 million. The companys statement of cash flows, prepared under the indirect method, contained the items presented in the following table where negative numbers represent reductions in cash. Of the items listed, assume that Depreciation and amortization and Other net noncash expenses (benefits) affect operating expenses and that Other changes in current assets and liabilities, net affect other expenses.

	(in millions)
Proceeds from long-term debt	$ 400
Dividends paid	(194)
Additions to property, plant, and equipment	(180)
Purchases of marketable securities	(76)
Sales and maturities of marketable securities	57
Disposal of property, plant, and equipment	6
Repurchase of common stock	(389)
Other financing activities, net	13
Net income	479
Depreciation and amortization	240
Other net noncash expenses (benefits)	(7)
Changes in operating assets and liabilities
Increase in trade receivables	(103)
Increase in inventories	(204)
Increase in accounts payable and accrued liabilities	85
Decrease in income taxes payable	(66)
Other changes in current assets and liabilities, net	(32)

Assume that these are all the items in Smuckers cash flow statement. Prepare the statement of cash flows for J.M. Smucker using the direct method for reporting cash flows from operating activities. Omit the schedule reconciling net income to net cash provided by operating activities.

Discuss the relation between operating cash flow and investing and financing needs.