Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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1. Why does the company add back depreciation to compute net cash flows from operating activities?

2. Why are there changes in accounts receivable and inventories as adjustments to net earnings. Are accounts receivable and inventories balances increasing or decreasing during the year?

3. It is reported that the company invested $572 million in property, plant, and equipment. Is this an appropriate type of expenditure for the company to make? What relation should expenditures for PPE have with depreciation expense? 

4. Stryker paid $300 million to repurchase its common stock in fiscal 2018 and, in addition, paid dividends of $703 million. Thus, it paid $1.003 million of cash to its stockholders during the year. How do we evaluate that use of cash relative to other possible uses for the company's cash?

5. Provide an overall assessment of the company's cash flows for fiscal 2018. In the analysis, consider the sources and uses of cash.

STRYKER CORPORATION
Consolidated Statements of Cash Flows
For Year Ended December 31, 2018 (S millions)
Operating activities
Net earnings (loss)..
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation ..
Amortization of intangible assets
Share-based compensation
Recall charges, net of insurance proceeds
Sale of inventory stepped up to fair value at acquisition
Deferred income tax benefit (expense)
Changes in operating assets and liabilities
Accounts receivable
$3,553
306
417
119
23
16
(1,582)
(60)
(385)
Inventories
Accounts payable
Accrued expenses and other liabilities
Recall-related payments.
Income taxes. .
Other, net ....
116
289
(90)
(156)
44
Net cash provided by operating activities.
2,610
Investing activities
Acquisitions, net of cash acquired
Purchases of marketable securities.
(2,451)
(226)
394
Proceeds from sales of marketable securities
Purchases of property, plant and equipment
Other investing, net ..
(572)
(2)
Net cash used in investing activities.
Financing activities
Proceeds and payments on short-term borrowings, net.
Proceeds from issuance of long-term debt..
Payments on long-term debt
Dividends paid
Repurchase of common stock.
Cash paid for taxes from withheld shares
Payments to purchase noncontrolling interest.
Other financing, net...
(2,857)
(1)
3,126
(669)
(703)
(300)
(120)
(14)
10
Net cash provided by (used in) financing activities...
Effect of exchange rate changes on cash and cash equivalents
1,329
(8)
Change in cash and cash equivalents
Cash and cash equivalents at beginning of year
1,074
2,542
Cash and cash equivalents at end of year.
$3,616
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Transcribed Image Text:STRYKER CORPORATION Consolidated Statements of Cash Flows For Year Ended December 31, 2018 (S millions) Operating activities Net earnings (loss).. Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation .. Amortization of intangible assets Share-based compensation Recall charges, net of insurance proceeds Sale of inventory stepped up to fair value at acquisition Deferred income tax benefit (expense) Changes in operating assets and liabilities Accounts receivable $3,553 306 417 119 23 16 (1,582) (60) (385) Inventories Accounts payable Accrued expenses and other liabilities Recall-related payments. Income taxes. . Other, net .... 116 289 (90) (156) 44 Net cash provided by operating activities. 2,610 Investing activities Acquisitions, net of cash acquired Purchases of marketable securities. (2,451) (226) 394 Proceeds from sales of marketable securities Purchases of property, plant and equipment Other investing, net .. (572) (2) Net cash used in investing activities. Financing activities Proceeds and payments on short-term borrowings, net. Proceeds from issuance of long-term debt.. Payments on long-term debt Dividends paid Repurchase of common stock. Cash paid for taxes from withheld shares Payments to purchase noncontrolling interest. Other financing, net... (2,857) (1) 3,126 (669) (703) (300) (120) (14) 10 Net cash provided by (used in) financing activities... Effect of exchange rate changes on cash and cash equivalents 1,329 (8) Change in cash and cash equivalents Cash and cash equivalents at beginning of year 1,074 2,542 Cash and cash equivalents at end of year. $3,616
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