In reading 47, Problem 2 (page 396), we have a cash flow stateement in which change in debt is in parenthesis … looks a lot loike an outflow (repayment of debt). In the answer, however, they show this chnage in debt as increasing FCFE. How could that be? Didn’t we take shareholder’s funds to pay off debt (which is what FCFE would capture)

olivier, I noticed this a few months ago too when I encountered this problem. Observe that the bottom line of the financing activities section is labeled “Cash used for financing activities” rather than what I would have expected to see, which would have been something like “cash provided by financing activities” … Anyway, the result here is that a negative use of cash is actually a source of cash, so those first two “Notes payable” and “Long-term financing issuances” [(10) and (40), respectively] line items are actually increases in net borrowing. Further, notice that the third line item, “Common stock dividends” is a positive number (i.e. it increases the cash used for financing activities). The investing activities section is structured like this too. However, the operating activities section is arranged as I’d expect, ending with “Cash provided by operating activities.” These statements are from LaForge Systems FY02-FY03. How prevalent is this structure for the investing- and financing activities sections?