The Candela Corporation

The Candela Corporation

Case 4.2

The Candela Corporation are innovators in the field of advanced aesthetic laser systems. The developments they make help all physicians and personal care practitioners to treat a wide variety of cosmetic and medical conditions (Fraser, 2007).

Their statement of cash flows shows great losses for the company in 2002. The net income was actually a loss and the operating activities, investing, and financing activities brought no cash in that year. They did make a big turnaround in 2003 and then kept the steady increase for 2004. The big spending in 2002 really paid off in 2003 because there was a 264.8% increase in the operating activities production (-$7,071,000 to $11,655,000). However, there was a 90.3% decrease from 2003 to 2004, bringing the operating activities to having a small inflow of $1,132,000. All three years Candela has had high accounts receivable, which really hurts them because that is money that is theirs that they need to have in their possession. The company should be a little stricter in their policies on collecting payments from their customers because while it is good that they are selling more, maybe they are being a little too lenient. The accounts payable have had a steady decrease. A good sign that the company is paying off all type of debt.

Investing activities are limited to simply the purchase of property, plant and equipment. They have invested more in the past but it looks like they are slowing down on purchasing more property. From 2002 to 2003 there was a further plunge into a negative cash flow by 16%. Then, from 2003 to 2004, the investing went more towards a positive cash flow by 44.1%.

Financing activities are producing quite a bit of a positive cash flow, except for 2002. There was some repurchasing of treasury stock in 2002 and nothing else to balance out, therefore, the financing activities for the year had a negative cash flow. They turned it around to...