Reporting and Interpreting Cash Flows from Operating Activities from an Analyst’s Perspective (Indirect Method) Time Warner Inc. is a leading media and entertainment company with businesses in television networks, filmed entertainment, and publishing. The company’s 2008 annual report contained the following information (dollars in millions):
|
Net loss |
$13,402 |
|
Depreciation, amortization, and impairments |
34,790 |
|
Decrease in receivables |
1,245 |
|
Increase in inventories |
5,766 |
|
Decrease in accounts payable |
445 |
|
Additions to equipment |
4,377 |
Required:
1. Based on this information, compute cash flow from operating activities using the indirect method.
2. What were the major reasons that Time Warner was able to report a net loss but positive cash flow from operations? Why are the reasons for the difference between cash flow from operations and net income important to financial analysts?