Response to the following problem:
The operating activities section of the statement of cash flows for PepsiCo, Inc., owner of the Pepsi beverage brand, is shown as follows:
PepsiCo, Inc.
Statement of Cash flows-Operating Activities (annotated)
For the Year Ended December 28, 2004
| |
(in millions) |
|
Operating activities:
|
|
|
Net income
|
$4,212
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
Depreciation and amortization
|
1,264
|
|
Stock-based compensation expense
|
368
|
|
Impairment and restructuring charges
|
150
|
|
Bottling equity income, net of dividends
|
(297)
|
|
Other noncash charges and credits, net
|
(230)
|
|
Changes in operating working capital, excluding effects of acquisitions and dispositions accounts and notes receivable:
|
(130)
|
|
Inventories
|
(100)
|
|
Prepaid expenses and other current assets
|
(31)
|
|
Accounts payable and other current liabilities
|
216
|
|
Income taxes payable
|
(268)
|
|
Net change in operating working capital
|
$(313)
|
|
Other
|
$ (100)
|
|
Net cash provided by operating activities
|
$5,054
|
a. Why are impairment and restructuring charges added to the net income in determining cash flows provided by operating activities?
b. Why is the bottling equity income, net of dividends, subtracted from the net income in determining cash flows provided by operating activities?
c. What is "stock-based compensation expense," and why would it be added back to net income in determining cash flows provided by operating activities?