Candela Corporation Case
In 2002, Candela Corporation statement of cash flows shows a net loss of income at $2,154,000. The reason for the loss is from accrual methods as non-cash expenses are added back. This method shows the company the true cash flows of the business. Some of the items that were added back in that had a significant affect is from loss of the discontinued operations and the interest firm the stock warrants. The categories that had significant subtractions were the foreign currency exchange rate difference and the respect of the deferred taxes. The results are the working capital that had resulted in a gross outflow of cash flow, which caused the cash outflow to show from the operating activities. There is a purchase of fixed assets in the investment activities, which caused an outflow of cash. In the financing activities, it looks as if the total outflows were trying to stay in control with acquiring a modest debt and share issue. However, because of the previous commitments that the business had, they were required to buy back stock and to continue to pay on the existing debt. However, when this happened it caused another outflow of cash, and the results are a negative balance with the operating, investing, and financing activities. With the company they had a previous cash balance and had the ability to survive with a severe damaging effect to the cash balance. The net profit in 2003 was 6,814,000 as shown on the statement. Adjustments were made in the non-cash items. A very important adjustment was in the loss from notional interest on stock warrants, discontinued operations, notional interest on stock warrants, and the foreign exchange rate difference accrued. This tax benefit of stock option and the respect of deferred taxes were two important subtractions. The analysis of the working capital is there was cash flow from the notes, deferred income, the sale of inventories, sale of other assets, and more control on payroll...
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