The 2008 statement of cash flows for JCPenney reports (dollars in millions) net cash from operating activities of $1,155 (2008), $1, 249(2007), and $1,258 (2006). Included on the statement of cash flows (indirect method) in the computation of net cash from operating activities are adjustments for inventory of $382 (2008), −$241 (2007), and −$190 (2006).
REQUIRED:
Explain the nature of these adjustments and what they tell us about JCPenney’s inventory balance in 2008, 2007, and 2006. Discuss the cash flow implications of these inventory adjustments.