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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Variation in cash flows

Mattel, Inc., designs, manufactures, and markets toy products worldwide. Mattel’s toys include Barbie® fashion dolls and accessories, Hot Wheels®, and Fisher-Price brands. For a recent year, Mattel reported the following net cash flows from operating activities (in thousands):

First quarter ending March 31 $ (53,110)
Second quarter ending June 30 (187,663)
Third quarter ending September 30 18,435
Fourth quarter ending December 31 956,895

Explain why Mattel reported negative net cash flows from operating activities during the first and second quarters and a large positive cash flow for the fourth quarter, with overall net positive cash flow for the year.

To determine

Cash and cash equivalents: Cash is the money readily available in the form of currency. Cash equivalents are the near-cash items, which are readily convertible into cash.  Cash equivalents have a maturity period of three months, or less than 3 months.

To report: the reasons for reporting negative cash flows from operating activities during the first and second quarter and large positive cash flow for the fourth month and overall positive cash flows for the year.

Explanation

T manufacturers and retailers have experienced seasonal trend in the cash flows received from the operating activities of the company. M Incorporation experience a negative cash flow during the period and when merchandise inventory is ordered and being produced for a holiday season...

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