The analysis of Candela Corporation of all three years

Year 2002:In the year 2002, the business of Candela Corporation suffers a loss of $2,154,000. Remember all the calculation is made upon accrual basis. In order to compute the real cash flows, firstly we add back the non-cash expenses.

The most significant additions are loss from discontinued operations and notional interest on stock warrants. Moreover, we also subtract the impact of deferred taxes and foreign currency exchange rate differences. From the working capital’s perspective receivables, inventory and tax payable has increased while Warranty costs, payables and other assets are decreased during the year.The impact of these computations makes an impact on the operating activities of the company.

In the section of investing activities only the moment of acquiring fixed assets is reviewed. In the section of financing activities, the overall outflow is under control due to the issuance of shares and also due to the borrowings.On overall basis, the management of the company buy back its own shares in order to repay its existing debt. This transaction resulted in the form of outflow of cash from financing activities. Due to the outflows in operating, investing and financing activities cause slight liquidity problem but in the end the previous cash balances makes an overall positive impact on the cash and cash equivalents of the company.

Year 2003:In the year 2003, the business of Candela Corporation reported a net profit of $6,814,000.In order to adjust non cash items additions are loss from discontinued operations, notional interest on stock warrants and the foreign exchange rate difference are adjusted. Moreover, we also subtract the impact of deferred taxes and tax benefit on stock options.From the working capital’s perspective inflows are reported from notes, deferred income, and sale of inventory and other assets, a control on payroll costs and a tax refund. The outflow of cash is mainly exists in the form of restricted cash, receivables, payment of payables and warranty costs.

Due to all the above mentioned transactions positive figure of cash flow from operating activities are emerged. In the section of investing activities only the moment of acquiring fixed assets is reviewed of $169,000 in the form of outflow which is ore than the previous years and it is clearly indicated that the company is focusing on built new infrastructure. In the section of financing activities shares were issued, payment of long term debt, etc.The major inflow of cash is $176,000 which is due to the issuance of shares. Two sections operating and financing activity reported an inflow except the investing activity which shows an outflow.

On overall basis, a positive net cash flow of $12, 156,000 increases the reserve of cash.Year 2004:In the year 2004, the business of Candela Corporation reported a net profit of $8,119,000.In order to adjust non cash items additions of new provisions for loss from discontinued operations, loss from discontinued operations, deferred taxes and the foreign exchange rate difference are adjusted. Moreover, we also subtract the benefit on stock options.It is evident that the management of the company continues its policies of innovations.

From the working capital’s perspective inflows are reported from notes, deferred income, warranty costs, a control on payroll costs and warranty costs. The outflow of cash is mainly exists in the form of restricted cash, receivables, payment of liabilities, purchase of inventory, taxation and other current assets.On overall non cash adjustments projects a positive figure due to the inflows from the working capital adjustments. In the section of investing activities only the moment of acquiring fixed assets is reviewed of $685,000 in the form of outflow which is very modest in comparison with the previous years. In the section of financing activities the major inflow was due to the issuance of shares worth $4,707,000.

Two sections operating and financing activity reported an inflow except the investing activity which shows an outflow. On overall basis, a positive net cash flow of $5,326,000 increases the reserve of cash.Explain what information you gain from the statement of cash flows that cannot be found directly from the balance sheet or income statement. The information not found on the income statement and balance sheet is:• The cash received from sales • The cash receipt/payment for acquisition/disposal of fixed assets • Cash receipts or payments on behalf of royalty fees etc. • The interest, taxes actually paid for.

• Cash receipts for issue of shares • The payments made to suppliers and employees • Cash payments for debentures • Actual dividends paid or received • A tendency to forecast future cash flows • Highlighting business areas that require management attention in terms of cash flow. • A segregation of non-cash items .