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The statement of cash flows for Lands’ End is reproduced here: CASE 7–1,LANDS’ END, INC. & SUBSIDIARIES,Consolidated Statements of Cash Flows,FOR PERIOD ENDED,($ in thousands) Year 9 Year 8 Year 7,Cash flows from operating activities,Net income………………………………………………….$ 31,185 $ 64,150 $ 50,952,Adjustments to reconcile net income to,net cash flows from operating activities—,Pretax non-recurring charge……………………………12,600 — —,Depreciation and amortization ……………………………….. 18,731 15,127 13,558,Deferred compensation expense……………………………… 653 323 317,Deferred income taxes…………………………………………… (5,948) (1,158) 994,Pretax gain on sale of subsidiary…………………………….. — (7,805) —,Loss on disposal of fixed assets……………………………… 586 1,127 325,Changes in assets and liabilities excluding,effects of divestitures,Receivables …………………………………………………. (5,640) (7,019) (675),Inventory …………………………………………………….. 21,468 (104,545) 22,371,Prepaid advertising ………………………………………. (2,844) (7,447) 4,758,Other prepaid expenses…………………………………. (2,504) (1,366) (145),Accounts payable …………………………………………. 4,179 11,616 14,205,Reserve for returns……………………………………….. 1,065 944 629,Accrued liabilities ………………………………………… 6,993 8,755 4,390,Accrued profit sharing…………………………………… (2,030) 1,349 1,454,Income taxes payable……………………………………. (5,899) (1,047) 8,268,Other ………………………………………………………………….. 1,665 64 394,Net cash flows from (used for) operating activities……………. 74,260 (26,932) 121,795,Cash flows from (used for) investing activities,Cash paid for capital additions ………………………………….. (46,750) (47,659) (18,481),Proceeds from sale of subsidiary ………………………………… — 12,350 —,Net cash flows used for investing activities……………………… (46,750) (35,309) (18,481),Cash flows from (used for) financing activities,Proceeds from short-term debt ……………………………………. 6,505 21,242 1,876,Purchases of treasury stock……………………………………….. (35,557) (45,899) (30,143),Issuance of treasury stock…………………………………………. 1,845 409 604,Net cash flows used for financing activities …………………….. (27,207) (24,248) (27,663),Net increase (decrease) in cash and cash equiv……………….. $ 303 $ (86,489) $ 75,651,Beginning cash and cash equivalents …………………………….. 6,338 92,827 17,176,Ending cash and cash equivalents…………………………………. $ 6,641 $ 6,338 $ 92,827,,Required:,a. Lands’ End recently implemented a strategy of filling nearly all orders when the order is placed. In what year do,you believe the company implemented this strategy and how is the strategy reflected in the information contained,in the statement of cash flows?,,b. Explain how the following items reconcile net income to net cash flows from operating activities:,(1) Depreciation (2) Receivables (3) Inventory (4) Reserve for returns,,c. Calculate free cash flows for each year shown.,,d. How does Lands’ End use its free cash flow? Do you think its use of free cash flows reflects good financial,strategy?,

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