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Candela Corporations Case

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Candela Corporation Case P.1

Candela Corporation Case
Tara Hall
ACC / 230
November 6, 2011
Mark Bull

Candela Corporation Case P.2
In 2002, the Candela Corporation had a cash flow from operation activities of $7,071,000 which is great than the net loss of $2,154,000. The net loss was due mostly to increases of accounts receivable and inventories, and a decrease in accounts payable. The purchase of new plant assets, repurchase of treasury stock, and cash used in operating activities went to the decrease in the balance in cash and cash equivalents. The net loss was calculated using the accruals method. In order to reach the real cash flows, the non-cash expenses had to be re-added. Of these, the most important additions were the loss from the discontinued operations and interest on stock warrants; the two most important subtractions were due to the deferred taxes and foreign currency exchange rate difference. The analysis of working capital showed that: * Receivables, inventory and tax payable increased by a significant amount. * Warranty costs, payables and other assets decreased, but by a lower margin.
This shows that the working capital adjustments resulted in a gross outflow of cash which causes the cash outflow in the form of operating activities. In the investing activities, it is shows the only item and that is the purchase of fixed assets, which causes an outflow in terms of investing activities. In financing activities, the overall outflow was to be brought under control by means of share issue and borrowing modest debt, but due to previous commitments, the company had to buy back stock and also repay its existing debt. This caused another outflow of cash in financing activities. Since the results of operating, investing and financing activities were negative; this caused a net cash outflow from the business. Since the

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