Candela Corporation Case

Candela Corporation Case

Candela Corporation Case

Felicia East

Axia College of University of Phoenix

September 20, 2009

In 2002, the Candela Corporation had a significant increase in receivables, inventory, and taxes payable. There was a decrease in warranty costs, payables and other assets, but by a lower margin. Based on the accrual basis of accounting the business had a net loss of $2,154,000 in 2002. To reach the actual cash flows, non-cash expenses had to be added back, such as loss from discontinued operations and notional interest on stock warrants. The largest deductions were in respect to deferred taxes and foreign currency exchange rate differences. The company attempted to correct problems with cash flow by issuing shares of stock and borrowing modest debt to give them leverage. Due to previous commitments, the company had to buy back stock and repay its existing debt. This would have put the company under tremendous strain had it not had previous cash balances. Although, this did put a large strain on beginning cash balances.

In 2003, the Candela Corporation’s cash inflows were from notes, deferred income, sale of inventory, sale of other assets, a control on payroll cost, and a tax refund. The business had a net profit of $6,814,000. The major cash outflows were from restricted cash, receivables, payment of payables and warranty costs. Cash flows from operating activities were $18,726,000 more from the last year. After the payment of long-term debt and lines of credit, the financing activities saw a considerable amount of shares issued. The Candela Corporation had a positive net cash flow of $12, 156,000 in 2003 and increased the business's cash reserves.

The information not found on the income statement and balance sheet is as follows:

The cash received from sales

The payments made to suppliers and employees

Cash receipts or payments on behalf of royalty fees, etc.

The interest, taxes actually paid...