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13-Cash Flow Statement

13-Cash Flow Statement



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Published by tibip12345
accounting, Wiley
accounting, Wiley

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Published by: tibip12345 on Oct 17, 2009
Copyright:Attribution Non-commercial


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chapter 13
Cash Flow Statement
Accounting Matters!
You Have to Spend Money to MakeMoney
Big-ticket leisure travel has become big business. And perhaps no company has tapped into this marketmore thoroughly than Vancouver-based Intrawest Corporation. Intrawest is the world's largest developerand operator of destination resorts, whose flagship Whistler/Blackcomb resort will play host to theWinter Olympic Games in 2010.The secret to the company's success is its growth formula: Start with a resort. Build a village so peoplestay longer. This attracts more visitors who come more often and spend more money. Build more realestate attractions, drawing in more people. This leads to the creation of shops, hotels, conventioncentres, and restaurants. The result: a year-round destination resort that puts the company into a financialposition where it can invest in more locations. It's a fine balance of spending money to make money andmaking sure there is enough cash flow to cover debt.In 2003, Intrawest's formula needed a bit of tweaking. While resort operations were cash flow–positive,the real estate business was cash flow–negative. To solve this problem, the company formed twopartnerships with outside investors to create Leisura Developments, which takes on the most capital-intensive development projects. “As a result, the amount of capital that we are required to invest in newreal estate projects is significantly reduced,” says David Blaiklock, Intrawest's vice president andcorporate controller.The initial result was indeed significant. Cash flow from operating activities for the 2004 fiscal year wasU.S. $422.9 million, compared to a negative cash flow of U.S. $20.9 million in 2003. Intrawestgenerated U.S. $303.1 million in free cash flow in 2004, which it used to reduce debt.“A significant component of that cash flow was the one-time impact of introducing this partnership
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structure,” Mr. Blaiklock stresses. Still, by selling real estate projects to Leisura, the company's cashflow requirements will be reduced.As for the 2010 Olympics, their impact on cash flow can only be positive. Since Whistler/Blackcombalready hosts World Cup alpine ski events, no infrastructure investment is required. The federal andprovincial governments are spending millions on improvements to the highway from Vancouver toWhistler, which will increase real estate values and the number of resort visitors. The new athletes'village will provide affordable housing for resort employees. And then there's the prestige that comeswith having been an Olympic host city. Although Whistler/Blackcomb is already a world-classdestination, the Olympics will only generate more interest and more visitors, and thus more cash.
Intrawest: www.intrawest.com  
The Navigator
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Feature Story 
Study Objectives 
Chapter Preview 
Read text and answer
Before You Go On 
Using the Decision Toolkit 
Summary of Study Objectives 
Decision Toolkit—ASummary 
Demonstration Problem 
Self-Study Questions 
Complete assignments
Copyright © 2008 John Wiley & Sons Canada, Ltd. All rights reserved.
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