Direct Method
As discussed in Chapter 7, we know that the cash flow statement is designed for the purpose of tracing a company’s cash flows and their sources/uses. Accordingly, under the direct method of preparing the cash flow from operating activities section, each income statement line item—revenues, cost of goods sold (COGS), selling, general and administrative (SG&A), interest expense, income taxes, etc.—is converted from accrual to cash accounting (Exhibit A.3).
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||
In millions | fiscal year ended Dec. 31, 2005 (52 weeks) | fiscal year ended Jan. 1, 2005 (52 weeks) | fiscal year ended Jan. 3, 2004 (53 weeks) | ||
Cash flows from operating activities: | |||||
Cash receipts from sales | $ 36,923.1 | $ 30,545.8 | $ 26,276.9 | ||
Cash paid for inventory | (26,403.9) | (22,469.2) | (19,262.9) | ||
Cash paid to other suppliers and employees | (8,186.7) | (6,528.5) | (5,475.5) | ||
Interest and dividends received | 6.5 | 5.7 | 5.7 | ||
Interest paid | (135.9) | (70.4) | (64.9) | ||
Income taxes paid | (591.0) | (569.2) | (510.4) | ||
Net cash provided by operating activities | 1,612.1 | 914.2 | 968.9 | ||
Cash flows from investing activities: | |||||
Additions to property and equipment | (1,495.4) | (1,347.7) | (1,121.7) | ||
Proceeds from sale-leaseback transactions | 539.9 | 496.6 | 487.8 | ||
Acquisitions, net of cash and investments | 12.1 | (2,293.7) | (133.1) | ||
Cash outflow from hedging activities | — | (32.8) | — | ||
Proceeds from sale or disposal of assets | 31.8 | 14.3 | 13.4 | ||
Net cash used in investing activities |
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