In the long run, a company must generate positive net cash flows from operating activities to survive. A business that has negative cash flows from operations will not be able to raise cash indefinitely from other sources and will eventually cease existing. Many creditors and stockholders are reluctant to invest in companies that do not generate positive cash flows from operations. However, some investors will invest in companies with negative cash flows from operations due to an optimistic future outlook for the company. Thus, investors have invested millions of dollars in Internet companies that have negative cash flows from operations.

Instructions

a.       Visit Coca-Cola’s Internet site ( www.coke.com ) and select “Investors.” Under “Financial Information,” select the most recent SEC 10K filing or annual report. View the Consolidated Statements of Cash Flows.

b.       Visit Amazon.com ’s Internet site ( www.amazon.com ) and select “Investor Relations” at the bottom of the page, then click “SEC Filings.” Select the most recent SEC 10K filing or annual report and view the Cash Flow Statement.

c.       Compare the Net Cash Provided by Operating Activities for each company. Which company has higher Net Cash Provided by Operating Activities? Speculate why one company has much higher Net Cash Provided by Operating Activities than the other.

d.      What type of company may have Negative Net Cash Provided from Operating Activities?

e.      What type of company may have large Positive Net Cash Provided from Operating Activities?