Solution to Polaroid Cash Flow Statement Analysis:

|Observations |
|Cash from operations is positive in 98 and 99 and becomes Negative in ’00 – a clear sign of weakness for a mature |
|business – not unusual for a young startup. |
|Loss in 98 to a small profit and a larger profit in 00. |
|Inventory increased in 00 using up operating cash and this may be a sign of weak sales resulting in unintentional |
|building of inventory. |
|Receivables decline which provides cash but may also be a sign of sales weakness or more aggressive collections to |
|compensate for weak cash position. |
|Investing activities are using cash. |
|Asset replacement exceeds depreciation suggesting that they are replenishing fixed assets. |
|Cash from operations is not sufficient to cover fixed asset purchases so they are being funded from other sources. |
|Sale of other assets is providing funds to pay for some of the fixed asset replacement. |
|No new debt was issued in 98 or 00. In 99, some new debt was financed re-financing 200M of other L.T. Debt – Perhaps |
|this suggest an inability to borrow due to weak cash flow from operations and profits. |
|Cash dividend is paid all three years. In 98 and 99, the dividend is paid when there is not adequate cash