Consider the following abbreviated financial statements for Parrothead Enterprises: Parrothead Enterprises t-1 and t Partial Balance Sheets Assets Liabilities and Owners' Equity Year Year t-1 Year Year t-1 t Current assets 653 707 Current liabilities 261 293 Non-current assets 2,691 3,240 Non-current liabilities 1,422 1,512 Parrothead Enterprises Year t Income Statement Sales 8,280 3,861 738 211 Costs Depreciation Interest paid

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.

Finance is Fun, Inc recently reported net income of $4.2 million, depreciation of $750,000, and amortization of $100,000. What was its net cash flow?

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