Each question would need to be a minimum of 250 words. At least two external scholarly sources on the analysis topics must be included and cited for EACH individual question
1. What is meant by "presentation of financial statement information in common-size amounts rather than dollar amounts?" Why is this type of presentation sometimes more meaningful than use of actual dollar amounts?
2. Why is trend just as important if not more important than information that pertains to only one year?
3. Why do manager put such a great amount of emphasis on controlling fixed cost in their organizations?
4. What is meant by the statement, my company has good operating leverage? How does good operating leverage magnify earnings results with modest revenue increase?
5. Describe the production characteristics (for example, high-volume, specialty, etc.) of the three products manufactured by Drilling Innovations, Inc. in our case study.
6. Describe the characteristics of products which would suggest it would be better to use ABC as an indirect cost allocation method over a traditional method such as direct labor hours.
7. Why is it important to investigate both price (rate) and volume (efficiency) variances when rewarding employees for satisfactory work when performance evaluations are based on meeting budgets?
8. What are some qualitative consideration that might be helpful in employee performance evaluations?
I. Vonage Holding Corporation provides telecommunication services using voice over Internet technology. It began operations in 2002 and has never made a profit. By the end of 2008 it had cumulative losses of $1 billion. Vonage's statements of cash flows for 2006, 2007, and 2008 follow.
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VONAGE HOLDINGS CORP. Statements of Cash Flows (amounts in thousands)
|
|
For the Years Ended
|
|
2008
|
2007
|
2006
|
|
Cash Rows from Operating Activities
|
|
|
|
|
Net income (loss)
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$(64,576)
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$(267,428)
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$(338,573)
|
|
Depreciation and amortization and impairment charges
|
45,796
|
33,574
|
22,709
|
|
Amortization of intangibles
|
2,816
|
2,144
|
968
|
|
Loss on early extinguishment of notes
|
30,570
|
-
|
-
|
|
Beneficial conversion on interest in kind on convertible notes
|
108
|
42
|
32
|
|
Amortization of discount on debt
|
882
|
-
|
-
|
|
Accrued interest
|
3,014
|
846
|
4,002
|
|
Allowance for doubtful accounts
|
207
|
1,852
|
266
|
|
Allowance for obsolete inventory
|
1,519
|
2,799
|
1,441
|
|
Amortization of deferred financing costs
|
-
|
4,689
|
1,999
|
|
Amortization of debt-related costs
|
3,237
|
-
|
-
|
|
For the Years Ended
|
|
2008
|
2007
|
2006
|
|
Loss (gain) on disposal of fixed assets
|
12
|
283
|
320
|
|
Share based expense
|
12,238
|
7,542
|
26,980
|
|
Other adjustments
|
-
|
-
|
(49)
|
|
Accounts receivable
|
2,028
|
(5,296)
|
(10,196)
|
|
Inventory
|
7,472
|
2,196
|
(10,133)
|
|
Prepaid expenses and other current assets
|
(282)
|
(6,185)
|
(6,218)
|
|
Deferred customer acquisition costs
|
13,322
|
(10,796)
|
(21,053)
|
|
Due from related parties
|
2
|
74
|
32
|
|
Other assets
|
(7,498)
|
(81)
|
(294)
|
|
Accounts payable
|
(22,029)
|
(2,966)
|
42,407
|
|
Accrued expenses
|
(12,738)
|
(77,770)
|
62,281
|
|
Deferred revenue
|
(10,124)
|
20,509
|
34,181
|
|
Other liability
|
(5,321)
|
23,046
|
-
|
|
Net cash flows from operating activities
|
655
|
(270,926)
|
(188,898)
|
|
Cash Flows from Investing Activities
|
|
|
|
|
Capital expenditures
|
(11,386)
|
(20,386)
|
(45,336)
|
|
Purchase of intangible assets
|
(560)
|
(5,500)
|
(5,268)
|
|
Purchase of marketable securities
|
(21,375)
|
(236,875)
|
(639,707)
|
|
Maturities and sales of marketable securities
|
101,317
|
446,949
|
484,116
|
|
Acquisition and development of software assets
|
(26,530)
|
(21,346)
|
(4,060)
|
|
Decrease (increase) in restricted cash
|
(980)
|
(31,385)
|
(543)
|
|
Net cash flows from investing activities
|
40,486
|
131,457
|
(210,798)
|
|
Cash Flows from Financing Activities
|
|
|
|
|
Principal payments on capital lease obligations
|
(1,036)
|
(1,020)
|
(826)
|
|
Principal payments on debt
|
(326)
|
-
|
-
|
|
Proceeds from issuance of debt
|
223,200
|
-
|
2.047
|
|
Discount on notes payable
|
(7,167)
|
-
|
-
|
|
Early extinguishment of notes
|
(253,460)
|
-
|
-
|
|
Debt-related costs
|
(26,7991
|
-
|
(2831
|
|
Proceeds from subscription receivable, net
|
9
|
279
|
169
|
|
Proceeds from common stock issuance, net
|
-
|
-
|
493,040
|
|
Purchase of treasury stock
|
-
|
-
|
(11,723)
|
|
Proceeds (payments) for directed-share program, net
|
62
|
169
|
(5,426)
|
|
Proceeds from exercise of stock options
|
47
|
817
|
431
|
|
Net cash flows from financing activities
|
(65,470)
|
245
|
477,429
|
|
Effect of exchange rate changes on cash
|
(1,079)
|
513
|
(29)
|
|
Net change in cash and cash equivalents
|
(25,408)
|
(138,711)
|
77,704
|
|
Cash and cash equivalents, beginning of period
|
71,542
|
210,253
|
132,549
|
|
Cash and cash equivalents, end of period
|
$46,134
|
$71,542
|
$ 210,253
|
Required - Each question would need to be a minimum of 200 words and at least two external scholarly sources
a. This chapter explained that many companies that report net losses on their earnings statements report positive cash flows from operating activities. How does Vonage's net income for each year compare to its cash flows from operating activities?
b. Based only on the information in the statements of cash flows, does Vonage appear to be improving its position in the telecommunications business? Explain.
c. In 2008 Vonage paid off over $250 million in debt. Where did it get the funds to repay this debt?
d. All things considered, based on the information in its statements of cash flows, did Vonage's cash position appear to be improving or deteriorating?