Question

Hi, I am looking for help in analysing the cash flow statement below. According to the instruction.

Investing Activities * Discuss line items (not the subtotal).

You need to analyze items within each section. Do not analyze the subtotals. The analysis should be structured in the following manner: your observation of a specific item, an indication of whether this observation is favorable or unfavorable, and then a detailed explanation of your rationale (why).

Investing Activites Cash flows provided by investing activities: Additional to property, plant and equipment Acquisitions, net of cash acquired Purchases of available-for-sale debt investment Sales of available-for-sale debt investments Maturities of available-for-sale debt investment Purchases of trading assets Maturities and sale of trading assets Purchases of equity investments Sales of equity investment Proceeds from divestitures other investing Net cash used in investing activities (15,181) (190) (3,843) 195 2,968 (9,503) 12,111 (874) 2,802 548 (272) (11,239) (11,778) (14,499) (2,746) 1,833 3,687 13,700 13,970 (1,619) 5,236 3,124 730 11,638 (9,625) (15,470) (9,269) 2,847 5,654 (12,237) 10,898 (963) 1,080 1,268 (25,817)

Answer 1

Cash provided by investing activities represent the outflow or inflow of cash as an capital expenditure. Negative cash flow from investing activities shows that the entity has purchased the assets during the year or make any investments. Positive cash flow from these activities shows that the entity has sold the assets during the year. In the given questions the items shown under the investing activities provided us with the following information:

• Addition to property plant and equipment shows that the entity has invested in the assets and it helps to increase the future production of the entity. Thus investing in the property plant and equipment is a favorable thing for the stakeholders.
• The company has acquired another entities during the year for which the company paid the excess cash. It is not favorable because it is the excess cash paid by the company to acquire the entities. It will be recognized as goodwill in the balance sheet.
• The company has invested in the available for sale investments. It indicates that the company has excess cash balances with it. Therefore the company has invested in available for sale investments.
• Sale of available for sale investments shows a positive balance. The company has sold during the year because the company can earn profits by selling the available for sale investments. It will increase the cash balance of the company. Maintaining a high level of cash balance affects the working position of the company.
• Maturities for available for sale investments shows a positive balance. The entity's cash balances are increased due to the maturities. It is not favorable for the company to maintain a high level of cash balance.
• Purchase of trading assets is a favorable event because the company has excess cash balances and by purchasing the trading assets the cash can be utilized and they can be sold at profit.
• Maturities of the trading assets shows a positive balance and increase the cash balance of the entity. Idle cash balances are not favorable for the entity.
• Equity investments purchased is a favorable event because the company is purchasing the stakes of the another company.
• Sale of equity investments refers to sale of the shares of the another company. It is not favorable because it increase the cash balances of the entity and the company looses the stake in the other company.
• The company has sold its subsdiary is not an favorable event for the company. It depicts that the entity has not managed the subsdiaries properly and incurred losses or due to some other causes.
• Other investing activities shows a negative balance. It is analyzed that the entity has make investments or purchased any asset which is favorable for future.