Question

Required: Discuss the relations between net income and cash flow from operations and among cash flows from operating, investing, and financing activities for the firm over the three year period. Identify characteristics of coca cola's cash flows that you would expect for a mature company.

Cash flow from operations Cash flow from investing Cash flow from financing One of these firms is eBay, an (3,491) 1,657 (1,654) online retailer with a three-year growth in sales of 3373%, and other is TJx Companies, Inc., a specialty retail store with a three year growth in sales of 393% Identify each firm and explain your reasoning. Problems and Cases 3.18 Interpreting the State pany statement of cash flows for Coca-Cola for three years ment of Cash Flows. The Coca-Cola Com- (Coca-Cola) manufactures and markets a variety of beverages. Exhibit 3.16 presents a Exhibit 3.16 The Coca-Cola Company Statement of Cash Flows (amounts in millions) (Problem 3.18) Year Ended December 31, Year 3 Year 2 Year 1 OPERATING ACTIVITIES Net income Depreciation and amortization Stock-based compensation expense Deferred income taxes Equity income or loss, net of dividends Foreign currency adjustments Gains on sales of assets, including bottling interests Other operating charges Other items Net change in operating assets and liabilities Net Cash Provided by Operating Activities $5,807 $5,981 5,080 1,163 313 109 (452) 938 324 (35) 124 1,128 (130) 153 $ 7,571 (244) 166 (303) 159 233 (615) $ 5,957 $ 7,150 INVESTING ACTIVITIES Acquisitions and investments, principally beverage and bottling companies and trademarks $(759) $(5,653) (901) (240) Purchases of other investments Proceeds from disposals of bottling companies and other investments 479 Purchases of property, plant, and equipment (1,968) (1,648) (1,407)

Answer 1

Relations between net income and cash flow from operations and among cash flows from operating, investing, and financing activities
		Amount in Millions
	Particulars	Year 3	Year 2	Year 1
	Net Income $	5807	5981	5080
	Operating Activities Cash Flow	7571	7150	5957
	Investing Activities Cash Flow	2363	6719	1700
	Financing Activities Cash Flow	3985	973	6583
	Net Income to Operating Cash Flow	76.70	83.65	85.28
	Net Income to Investing Cash Flow	245.75	89.02	298.82
	Net Income to Financing Cash Flow	145.72	614.70	77.17
	Ratio of Net income to Operating Cash Flows is decreasing consistently. However the revenue is increasing.Hence focus on increasing the sales revenue.
	Ratio of Net income to Financing Cash Flows is increasing consistently