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reporting and interpreting cash flows from operating activities from an analyst rsqu 727374

Reporting and Interpreting Cash Flows from Operating Activities from an Analyst’s Perspective (Indirect Method)

Pizza International, Inc., operates 700 family restaurants around the world. The company’s annual report contained the following information (in thousands):

Operating Activities

Net loss

$(9,482)

Decrease in accounts payable

2,282

Depreciation

33,305

Decrease in accrued liabilities

719

Increase in receivables

170

Increase in income taxes payable

1,861

Decrease in inventories

643

Reduction of long term debt

12,691

Increase in prepaid expenses

664

Additions to equipment

29,073

Required:

1. Based on this information, compute cash flow from operating activities using the indirect method.

2. What were the major reasons that Pizza International was able to report positive cash flow from operations despite having a net loss?

3. Of the potential causes of differences between cash flow from operations and net income, which are the most important to financial analysts?

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