Hertz case

1378 words 6 pages
1) Hertz makes five adjustments (ignoring ‘Other adjustments’) to net income before including the changes in operating assets and liabilities. List each of these five items and explain why each of these items is added (subtracted) from net income to calculate Net Cash Provided by Operating Activities.

Answer:

The five adjustments to net income before including the changes in operating assets and liabilities in the consolidated statement of cash flows of Hertz Global Holdings, Inc. are listed as follows;

Explanation:

Since the net income reported in the statement of cash flows is transferred from the profit and loss account which is the difference between revenue and expenditures all of two types;

(a) Those
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5) Notice that the largest cash outflow (inflow) relates to rental car acquisition (disposal).
a. In which section of the cash flow statement are these cash flows reported?
Answer:
Yes, both large cash outflow and inflow relate to rental car acquisition. The acquisition cost on purchase of revenue equipment expenditure has resulted in cash outflow of ($ ‘000’ 7,527,317) and proceeds from disposal of revenue equipment expenditure resulted in cash inflow amounting to ($ ’000’ 6,024,940) in the investing activities section.
Both the rental car acquisition and disposal are reported in the investing activities section of the cash flow statement as it relates to investing and disbursement of funds of the company which obviously cannot be reported under operating or financing activities.

b. If Hertz had leased the cars from the manufacturers under operating leases, in which section of the cash flow statement would the lease payments be reported?
Answer:

In case if Hertz had leased the cars from the manufacturers under operating leases, then it should be reported in the cash flow from operating activities section with description as Cash paid for operating lease.

c. Selected balance sheet and cash flow statement information for Coinstar (parent of Redbox), Netflix and Men’s Wearhouse are attached. Coinstar and

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