Part of the reason the company's cash position improve so much is that it deferred a lot of its taxes. In FY 2004, the company improved its top line (net income) again but overall had a much less positive cash flow from operations. It paid some of the taxes it accrued, and again faced a decline in accounts receivable. The provision for the disposal of discontinued operations potentially balances off much of the decrease in "other current assets." The company purchased less equipment than in previous years. Candela issued another round of common stock in FY 2004, and this issuance made a significant contribute to the company's increase in cash.

2. There are a few different things that can learned from the statement of cash flows that the income statement and balance sheet do not illustrate. The cash flow from operations is important because it allows the reader...

Additionally, the cash flows from financing is a very important part of the financial statements. It is important to know how a firm is dealing with its financial circumstances -- spending to prop up a falling stock price, paying down debt, or other key activities. The investor can get a better sense of what management thinks about the company's position by understanding what it is doing with its financing flows. The investing flows help to show how much the company is putting into growing. For example, Candela raised capital last year, but cut its investing flows. This is interesting -- why raise capital only to not use it? The statement of cash flows shows what the company is doing, and from that a lot can be learned…