Exhibit 1: Alpha Corporation
I. For each of the years on the Statement of Cash Flows:
1. What were the firm’s major sources of cash? Sources of cash: Sales of depreciable assets and sales of discontinued operations in 1990 and increasingly from operating activities, especially related to restructuring and other unusual items.
2. What were the firm’s major uses of cash? Cash comes mainly from payment of debt and investments in depreciable assets.
3. Was cash flow from operations greater than or less than net income? Explain in detail the major reasons for the difference between these two figures. The net income was negative from 1989 to 1991. The net income is negative due to the depreciation costs. Operating
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Concluding, this company seems to be in crisis of undergoing a transition phase.
Exhibit 2: Beta Corporation
I. For each of the years on the Statement of Cash Flows:
1. What were the firm’s major sources of cash? The main source of cash is A/R. In 1991 the company also gathered $23M issuing stock.
2. Was cash flow from operations greater than or less than net income? Explain in detail the major reasons for the difference between these two figures. The CFO was higher than net income in 1989 and 1990. In 1991, the CFO is lower than net income due to a considerable increase in payments for income tax and suppliers and employees.
3. Was the firm able to generate enough cash from operations to pay for all of its capital expenditures? In 1989 and 1990 the firm was able to generate enough cash flows to cover its capital expenditures. However, in 1991 the firm’s capital expenditures were 50% higher than CFO.
4. Did the cash flow from operations cover both the capital expenditures and the firm’s dividend payments, if any? I could not pinpoint any dividend payments in the statement.
5. If it did, how did the firm invest its excess cash? The firm used excess cash to pay off debt in 1990.
6. If not, what were the sources of cash the firm used to pay for the capital expenditures and/or dividends?
In 2007 the company was generating cash from everyday operations but the statement of cash flows shows that the company has had a negative profit from 2006 to 2007, but this is because More Vino has expenses that are higher than their sales
Operating cash flow was not enough to cover capital investments (this firm does not to appear to pay dividends as it does not show in the prior 3 years). The firm is financing it operations from the issuance of common stock. $23,082 was raised during the period, which is covering its investments in capital expenditures.
1. Their uses of cash were primarily used for paying off debt and investing it in marketable securities. Also they spent some of their cash on fixed assets. Even though their ending cash was lower than the previous year, they were using their cash effectively.
f. The largest use of cash from investing activities is for Capital Expenditures at $399 million. p. 42
In 20X4, Olentangy Health Care (OHC)’s cost of capital was 6%. Its investments on a historical cost valuation basis are $80,000, on a replacement cost basis are $100,000, and on a current market value basis are $110,000. If you were on OHC’s board, what minimum level of annual cash flow would you require in order to continue operations and proceed with planned significant new investments?
The statement of cash flows answers the following questions about cash: (a) Where did the cash come from during the period? (b) What
The cash flow statement consists of three parts: cash flows provided by operating activities of $13,831, cash flows provided by investing activities, and cash flows provided by financing activities effect of exchange rate changes on cash and cash equivalents of ($204)
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;
The statement of cash flows outlines some of the changes to the capital structure. The company added $164.5 million in a consolidated loan facility, and it paid out $138.1 million in dividends. There were no share buybacks during the year. The company states in the annual report (p.4) that it intends to maintain a conservative gearing ratio. The company in this section attributes its increased borrowings to projects and opportunities on which it has embarked. These investments lie within the integrated retail, franchise and property system. One of the
Estimated net income (loss) in 1984 excluding accounting and other charges identified in part A
The productive assets of property, plant, and equipment changed dramatically in 1996 they were 5,581 to 2010 an increase to 21,706. In total current assets there was a increase in 1996 from 5,910 to in 2010 21,579. Another significant change is in long term debt in 1996 of 1,116 to in 2010 an increase to 14,041. Also an important figure to note is in the retained earning in 1996 they were 94% (15,127) to 2010 68%
If you take away nothing else from this article, remember this: Net income is a fiction; cash from operations is reality.
2. The single most important assessment in Cash Flows in the “cash flow from financial operations” because it provides an overlook on management’s operating decisions. In this case, we can see that Reebok had reported positive cash flows from operations, for example in 1990 reported $39.2M while LA Gear reported a negative (40M) the same year. Looking closely, we can see that LA Gear was retaining huge quantities of inventory while at the same time, not collecting enough money from customers (A/R). Hence we can conclude that for Reebok, operations was a source of cash but on the other hand, LA Gear was quite the opposite: operations was a use (or drain) of cash. Turning our attention to “cash flows from financing activities” we can see that more differences. Reebok is borrowing little money, instead it is paying loans. LA Gear is borrowing huge quantities of money, for example in 1990 it borrowed $56M. As a result of this, we can see where the money to finance
The third question is asking for the source of the money that was used to purchase Maytag. According to the sources used here, the largest percentage of the money was from operations. Precisely, this question requires the most important item on the SCF that generates cash. It is very clear that the company’s principal source of liquidity is the cash that operating activities make (Bethel University, 2016). Considerably, it also consists of the net earnings that are adjusted non-monetary operating items which include depreciation as well as alterations in the operating assets and liabilities. The company’s assets and liabilities are the receivables, inventories, and payables. The money that the company’s operating activities earned in 2005 increased
Net income totaled $97.8 million in 1984, an increase of 5% from 1983.when looking at the Consolidated Balance Sheet (Exhibit2), we found that the total assets grew 15% to $2.7 billion at the end of fiscal 1984 due to addition of real estate inventories as part of the acquisition of another company. The ratio of debt to total capitalization jumped to 43% at 1984 from 20% at previous year.