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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Comparative Analysis: Under Armour, Inc., versus Columbia Sportswear

Refer to the 10-K reports of Under Armour, Inc., and Columbia Sportswear that are available for download from the companion website at CengageBrain.com.

Required:

What method of computing net cash flow from operating activities did Under Armour use?

What method of computing net cash flow from operating activities did Columbia use?

Would you expect these to be the same? Why or why not?

To determine

The indirect method is the reverse method which starts from the net income as per the income statement and added back all those types of expense which non-cash and non-operating expense. These types of expense which are not affected the cash inflow or outflow.

To discuss:

The method followed by the Company-A and Company-B for computing operating cash and if they have the same.

Explanation

In company-A, the company uses the indirect method because it began from net income and addition in the depreciation amount and non-operating expense.

In Company-B. Inc company uses the indirect method because it began from net income and added in the depreciation amount and non-operating expense.

Both companies use the indirect method.

There is a minor difference in the direct method and the indirect method because the starting point is different in both methods...

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