(Learning Objective 6: Using a cash flow statement) Excerpts from Smart Pro,
Inc.’s, statement of cash flows appear as follows:
|
Smart Pro, Inc. Consolidated Statement of Cash Flows (Adapted, partial) Years Ended December 31, |
||
|
(In millions) |
20X8 |
20X7 |
|
Cash and cash equivalents, beginning of year |
$ 2,976 |
$ 3,695 |
|
Net cash provided by operating activities |
8,654 |
12,827 |
|
Cash flows provided by (used for) investing activities: |
||
|
Additions to property, plant, and equipment |
(7,309) |
(6,674) |
|
Acquisitions of other companies |
(883) |
(2,317) |
|
Purchases of available for sale investments |
(7,141) |
(17,188) |
|
Sales of available for sale investments |
15,138 |
16,144 |
|
Net cash (used for) investing activities |
(195) |
(10,035) |
|
Cash flows provided by (used for) financing activities: |
||
|
Borrowing |
329 |
215 |
|
Retirement of long term debt |
(10) |
(46) |
|
Proceeds from issuance of stock |
762 |
797 |
|
Repurchase and retirement of common stock |
(4,008) |
(4,007) |
|
Payment of dividends to stockholders |
(538) |
(470) |
|
Net cash (used for) financing activities |
(3,465) |
(3,511) |
|
Net increase (decrease) in cash and cash equivalents |
4,994 |
(719) |
|
Cash and cash equivalents, end of year |
$ 7,970 |
$ 2,976 |
Required
As the chief executive officer of Smart Pro, Inc., your duty is to write the management letter to your stockholders to explain Smart Pro’s investing activities during 20X8. Compare the company’s level of investment with preceding years and indicate the major way the company financed its investments during 20X8. Net income for 20X8 was $1,291 million.