Week 6 Assignment Candela Corporation

Assignment: Candela Corporation Case

Candela Corporation Case

Snezana Risteska

In 2002 Candela Corporation had a net loss of $2,154,000. For this calculation was used the accruals method. Non-cash expenses need to be added back, as a correction to be reached the real cash flows. They were made very important corrections in loss from discontinued operations and accretion of imputed interest on stock warrants, and main subtractions were made in provision for deferred taxes and exchange foreign currency rate. The study of working capital presented significant increases in receivables, inventory and tax payable, and a decreased lower amount in payables, warranty costs and other assets. However it seems the working capital corrections caused total cash outflow resulting cash outflow of operating activities.

I found one and only entry that resulted outflow from investing activities and that is the purchase of fixed assets.

The corporation had to purchase back stock and likewise pay back the current debt. This initiated one more cash outflow in financing activities. The negative results of operating, investing and financing activities resulted net cash outflow from the company. As the company had prior cash balances, it was able to handle them but with critical loss to its cash balances.

In 2003 the net profit of Candela Corporation was $6,814,000. The main corrections between the non-cash items to be adjusted were notional interest on stock warrants, loss from discontinued operations and the exchange rate of foreign currency. Furthermore the main subtractions were regarding deferred taxes and tax benefit on stock options. The observations of working capital revealed that the inflows of cash came from sale of other assets, deferred income, notes, sale of inventory, a accrued payroll and related expenses and a tax refund. The cash outflows came from restricted cash, receivables, payment of payables and warranty costs. This caused inflow of cash, that...