ADOBE INC. CONSOLIDATED STATEMENTS OF INCOME (In millions, except per share data) December 3, 2021 Years...
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ADOBE INC. CONSOLIDATED STATEMENTS OF INCOME (In millions, except per share data) December 3, 2021 Years Ended November 27, 2020 November 29, 2019 Revenue: Subscription Product Services and other Total revenue Cost of revenue: Subscription Product Services and other $ 14,573 $ 555 657 15,785 11,626 $ 507 735 12,868 9,634 648 889 11,171 Total cost of revenue Gross profit Operating expenses: Research and development Sales and marketing General and administrative Amortization of intangibles 1,374 1,108 926 41 36 40 450 578 707 1,865 1,722 1,673 13,920 11,146 9,498 Total operating expenses Operating income Non-operating income (expense): Interest expense Investment gains (losses), net Other income (expense), net Income before income taxes 2,540 2,188 1,930 4,321 3,591 3,244 1,085 968 881 172 162 175 8,118 6,909 6,230 5,802 4,237 3,268 (113) (116) (157) 16 13 52 42 42 Total non-operating income (expense), net (97) (61) 5,705 4,176 (63) 3,205 Provision for (benefit from) income taxes 883 (1,084) 254 $ Net income 4,822 $ 5,260 $ 2,951 Basic net income per share $ 10.10 $ 10.94 $ 6.07 Shares used to compute basic net income per share 477 481 486 Diluted net income per share $ 10.02 $ 10.83 $ 6.00 Shares used to compute diluted net income per share 481 485 492 ADOBE INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) Cash flows from operating activities: Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, amortization and accretion $ Years Ended December 3, 2021 November 27, 2020 November 29, 2019 4,822 $ 5,260 $ Stock-based compensation Reduction of operating lease right-of-use assets Deferred income taxes Unrealized losses (gains) on investments, net Other non-cash items 2,951 788 1,069 757 757 909 788 73 87 183 (1,501) 3 (4) (11) (48) 7 40 14 Changes in operating assets and liabilities, net of acquired assets and assumed liabilities: Trade receivables, net (430) 106 (188) Prepaid expenses and other assets (475) (288) (551) Trade payables (20) 96 23 Accrued expenses and other liabilities Income taxes payable Deferred revenue Net cash provided by operating activities Cash flows from investing activities: 162 86 172 2 (72) 4 1,053 258 497 7,230 5,727 4,422 Purchases of short-term investments (1,533) (1,071) (700) Maturities of short-term investments 877 915 700 Proceeds from sales of short-term investments 191 167 86 Acquisitions, net of cash acquired (2,682) (101) Purchases of property and equipment (348) (419) (395) Purchases of long-term investments, intangibles and other assets (42) (15) (49) Proceeds from sales of long-term investments and other assets 9 3 Net cash used for investing activities (3,537) (414) (456) Cash flows from financing activities: Repurchases of common stock Proceeds from re-issuance of treasury stock Proceeds from issuance of debt Repayment of debt (3,950) (3,050) (2,750) 291 270 Taxes paid related to net share settlement of equity awards (719) (681) 233 (440) 3,144 (3,150) Other financing activities, net Net cash used for financing activities Effect of foreign currency exchange rates on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Supplemental disclosures: Cash paid for income taxes, net of refunds Cash paid for interest 77 (21) (4,301) (3,488) 11 (2,946) (26) 3 (13) (634) 1,828 1,007 4,478 2,650 1,643 $ 3,844 $ 4,478 $ 2,650 $ 843 $ 469 $ 352 $ 100 $ 88 $ 152 Required: 1. Using only the operating section of the cash flow statement, does it appear that earnings quality improved or deteriorated in 2021. Explain 2. Using only the income statement, does it appear that Adobe cut discretionary expenses to increase reported profit in 2021? Explain and show supporting calculations. ADOBE INC. CONSOLIDATED STATEMENTS OF INCOME (In millions, except per share data) December 3, 2021 Years Ended November 27, 2020 November 29, 2019 Revenue: Subscription Product Services and other Total revenue Cost of revenue: Subscription Product Services and other $ 14,573 $ 555 657 15,785 11,626 $ 507 735 12,868 9,634 648 889 11,171 Total cost of revenue Gross profit Operating expenses: Research and development Sales and marketing General and administrative Amortization of intangibles 1,374 1,108 926 41 36 40 450 578 707 1,865 1,722 1,673 13,920 11,146 9,498 Total operating expenses Operating income Non-operating income (expense): Interest expense Investment gains (losses), net Other income (expense), net Income before income taxes 2,540 2,188 1,930 4,321 3,591 3,244 1,085 968 881 172 162 175 8,118 6,909 6,230 5,802 4,237 3,268 (113) (116) (157) 16 13 52 42 42 Total non-operating income (expense), net (97) (61) 5,705 4,176 (63) 3,205 Provision for (benefit from) income taxes 883 (1,084) 254 $ Net income 4,822 $ 5,260 $ 2,951 Basic net income per share $ 10.10 $ 10.94 $ 6.07 Shares used to compute basic net income per share 477 481 486 Diluted net income per share $ 10.02 $ 10.83 $ 6.00 Shares used to compute diluted net income per share 481 485 492 ADOBE INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) Cash flows from operating activities: Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, amortization and accretion $ Years Ended December 3, 2021 November 27, 2020 November 29, 2019 4,822 $ 5,260 $ Stock-based compensation Reduction of operating lease right-of-use assets Deferred income taxes Unrealized losses (gains) on investments, net Other non-cash items 2,951 788 1,069 757 757 909 788 73 87 183 (1,501) 3 (4) (11) (48) 7 40 14 Changes in operating assets and liabilities, net of acquired assets and assumed liabilities: Trade receivables, net (430) 106 (188) Prepaid expenses and other assets (475) (288) (551) Trade payables (20) 96 23 Accrued expenses and other liabilities Income taxes payable Deferred revenue Net cash provided by operating activities Cash flows from investing activities: 162 86 172 2 (72) 4 1,053 258 497 7,230 5,727 4,422 Purchases of short-term investments (1,533) (1,071) (700) Maturities of short-term investments 877 915 700 Proceeds from sales of short-term investments 191 167 86 Acquisitions, net of cash acquired (2,682) (101) Purchases of property and equipment (348) (419) (395) Purchases of long-term investments, intangibles and other assets (42) (15) (49) Proceeds from sales of long-term investments and other assets 9 3 Net cash used for investing activities (3,537) (414) (456) Cash flows from financing activities: Repurchases of common stock Proceeds from re-issuance of treasury stock Proceeds from issuance of debt Repayment of debt (3,950) (3,050) (2,750) 291 270 Taxes paid related to net share settlement of equity awards (719) (681) 233 (440) 3,144 (3,150) Other financing activities, net Net cash used for financing activities Effect of foreign currency exchange rates on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Supplemental disclosures: Cash paid for income taxes, net of refunds Cash paid for interest 77 (21) (4,301) (3,488) 11 (2,946) (26) 3 (13) (634) 1,828 1,007 4,478 2,650 1,643 $ 3,844 $ 4,478 $ 2,650 $ 843 $ 469 $ 352 $ 100 $ 88 $ 152 Required: 1. Using only the operating section of the cash flow statement, does it appear that earnings quality improved or deteriorated in 2021. Explain 2. Using only the income statement, does it appear that Adobe cut discretionary expenses to increase reported profit in 2021? Explain and show supporting calculations.
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Accounting Principles
ISBN: 9781119707110
14th Edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Jill E. Mitchell
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