I've been reading that the computer industry is having money problems along with the rest of the economy," said Bee Del Conte as you walked with her to the library. "How is it, then, that I hear on the radio this morning that although Dell's cash flows from its operations last year were down significantly from prior years, its net income was not much lower than the year before?" Curious, the two of you stop by a computer terminal on the way to the reference section and do a quick search. A few clicks later you're looking at Dell's income statements and cash flow statements for the fiscal year ended January 30, 2009. These are reproduced in the financial statements and related disclosure notes of Dell in Appendix B located at the back of the text. They also can be found at www.Dell.com.

Required:

1. Without regard to Dell specifically, explain to Bee the difference between net income or net loss and the cash flows from operating activities.

2. Why did Dell add $769 million in the determination of cash flows from operating activities for depreciation and amortization?

3. The major contributor to Dell's having lower cash flows from operating activities than net income in fiscal 2009 is a sizable reduction in the amount Dell owes its suppliers. If Dell had used the direct rather than the indirect method of reporting operating activities, how would this reduction in accounts payable have affected cash from operating activities? Specifically, what is the dollar amount of the line item in the operating cash flows section of the statement (using the direct method) that would encompass the reduction in accounts payable?

4. Cash used in financing activities during fiscal 2009 was $1.4 billion, as compared to $4.1 billion in fiscal 2008 and $2.6 billion in fiscal 2007. What is the major contributor from year to year in the amount of cash used in financing activities? What other activity contributed to that reduction in cash used in financing activities during fiscal 2009?