Assignment: Candela Corporation Case
Using the Consolidated Statements of Cash Flows, prepare a summary analysis for the years ended July 3, 2004, June 28, 2003, and June 29, 2002. Analyze the cash flows for the Candela Corporation, Inc. for all three years.
While looking at the Consolidated Statements of Cash Flows for the Candela Corporation for 2004, 2003, and 2002, it is quite easy to see that the corporation is undergoing or has undergone many changes in these short three years.
In 2004, the cash flow from operations was $1,132 is much lower than the net income of $8,119. This may be due to the increase of Accounts Receivable of $7,663, the increase in other current assets of $2,550 and the decrease in income tax payable of $1,312. Cash flow from operations and from the issue of common stock went to purchase new plant assets and to increase the cash balance. The stock options were important because it showed that the business is continuing to follow its policy of innovation and advancement by providing a future estimate for closures and additions of new lines.
In investing activities, fixed assets are less than 2003 at $685,000. This shows the bulk of its fixed assets were bought in 2003 so the purchase level went down in 2004.
In the financing, the only significant inflow of cash was from the issued shares of $4707.
Excluding the investing activities, the cash flow of the financing and operation activities were positive. This gave a positive net cash flow of $5326 and increase to the business??™ cash reserves.
In 2003, the cash flow from operations was $11655. This is much higher than the net income of $6814. This is probably due to adjustments in loss from discontinued operations of $1013 and increase in liabilities like accrued payroll and income tax payable. Issue of common stock and cash flow from operations went to purchase new plant assets, repay borrowings and long-term debt and to increase the cash balance. The inflows of cash were from deferred income, sale of inventory, a control on payroll costs and taxes and notes. The outflows were from receivables, payment of payables, warranty costs and restricted cash. This made the figure of cash flows positive and $18726 more than 2002.
In investing activities, the fixed assets were $169,000 more than 2002..
The cash flows used by operations of $7,017 is higher than the net loss of $2,154. This was largely due to increases in Accounts receivable, inventories and decrease in Accounts payable.
The new plant assets, repurchase of treasury stock and cash used in operating activities all helped to decrease the balance in cash and cash equivalents.
From what I can see, the Candela Company is growing according to their policies with innovation and advancement. They believe in safe and quality products and their Consolidated Statement of Cash Flows for the three year period shows that their policies are being adhered to and are working. Each year the corporation has shown solid growth in the cash and cash equivalent area as well as the net cash from financing area. It is also obvious that the payment of long-term debt has had a substantial effect on the percent of interest charged to the company for debt.
Fraser, L. M., & Ormiston, A. (2007). Understanding financial statements (8th ed.). Upper Saddle River, NJ: Pearson/Prentice Hall.