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    Statement of cash flows

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    The statement of cash flows for Landsâ?? End is reproduced here: CASE 7â?" 1 LANDSâ?? 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 activitiesâ?"
    Pretax non- recurring charge.......................................... 12,600 â?" â?"
    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................................... â?" ( 7,805) â?"
    Loss on disposal of fixed assets................... 586 1,127 325
    Changes in assets and liabilities excluding
    Effects of divestures
    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
    Proceed s 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 equivalents 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

    a. Landsâ?? 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 con-tained 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. CHECK ( c ) Yr 9, $ 27,510
    d. How does Landsâ?? End use its free cash flow? Do you think its use of free cash flows reflects good financial strategy?

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