Use the Selected Data from the Consolidated Statements of Cash

question 7

Essay

Use the selected data from the consolidated statements of cash flows for Vancouver Corporation for the years ended December 31,2018 and 2017,to answer the questions that follow. $\begin{array}{lrr}\text { (in thousands)}&\underline{2018}&\underline{2017}\\\text { Operating Activities:}\\\text { Net income}&\$ 6,328 & \$ 6,093 \\ \text { Adjustments to reconcile net income to net cash provided by}\\\text { operating activities:}\\\text { Depreci ation } & 4,475 & 4,018 \\\text { Amortization of so ftware } & 517 & 983 \\\text { Effect of restructuring charges } & (355) & (445) \\\text { Deferred income taxes } & (606) & 358 \\\text { Gain on the disposal of fixed assets and other assets } & (261) & (273) \\\text { Changes in assets and liabilities (net of businesses acquired) } & &\\\text { Accounts receivable } & (2,736) & (3,727) \\\text { Inventories } & 73 & 432 \\\text { Other assets } & 880 & (1,087) \\\text { Accounts payable and accrued li abilities } & 362 & 699 \\\text { Other liabilities } & \underline{596} & \underline{1,814} \\\text { Net cash provided by operating activities } & \underline{9,273} & \underline{\$ 8,865} \\\text { Net cash used by investing activities } & \underline{ \$(6,131) }&\underline{ \$(6,155)} \\\text { Net cash provided by financing activities } & \$(4,993) & \$(3,090) \\\text { Cash and cash equival ents at end of year } & \underline{\$ 5,375 }&\underline{ \$ 7,106 }\\\end{array}$


Required
(A)What method does Vancouver use to calculate the net cash provided by operating activities?
(B)In 2018,why are depreciation and amortization expenses added back to net income in the Operating Activities section of the statement of cash flows?

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Definitions:

Profit Generated

The total amount of financial gain made by a business after all expenses have been subtracted from total sales.

Controllable Margin

The portion of profit or margin over which management has control, often excluding fixed costs.

Average Assets

A financial metric calculated by taking the average of a company's total assets at the beginning and end of an accounting period, used to assess performance efficiency.

ROI

Return on Investment, a performance measure used to evaluate the efficiency or profitability of an investment or compare the efficiency of several different investments.