Problem
1. Referring to the cash flow statements from 1997 and 2013 in Exhibits2 and 6, does the change in the balance sheet accounts used to answer question 1 articulate with (i.e., agree with) what is reported in the statement of cash flows? Why do you think they do or do not articulate in each of these years?
2. Prepare a direct-method operating section of the statement of cash flows for 1997 using the information available in the balance sheet and income statement (Exhibits 3 and 4), as well as the supplementary cash flow information (Exhibit 5). The template on the following page may be useful in answering this question. Does the cash from operations you compute using the direct-method agree with what Amazon.com reports using the indirect-method?
3. What are the largest two adjustments listed in the cash flow statement in Exhibit 2 for 1997? Should any of these be of concern to investors? Explain. (Remember, adjustments are only found in the CFO section of firms that use the indirect method.)
4. Compare Net Income relative to CFO in fiscal years 2011-2013. What, if anything, can you infer about the quality of earnings at Amazon over these periods based on the comparison of these two numbers?