Question

For the Years Ended December 31, (in millions) Operating activities Net carnings Noncash items 2017 2016 2015 $10,823 7,073 S 5,868 Depreciation and amortization Deferred income taxes Share-based compensation Other, net 2,245 2,055 ,693 (965) 597 217 (73) 406 (82) 235) 81 485 Net change in other operating items, net of effects from acquisitions and changes in AARP balances: Accounts receivable Other assets Medical costs payablo Accounts payable and other liabilities Unearned revenues ,062) 357(591) (630) 1,601) (1,430) 1,284 ,849 2,585 930 1,494 ,280 157 (202) 237 13,596 9,795 9,740 Cash flows from operating activities Investing activities Purchases of investments Sales of investments Maturities of investments Cash paid for acquisitions, net of cash assumed Purchases of property, equipment and capitalized software Other, net Cash flows used for investing activities (14,388) (17,547) (9,939) 4,623 7,339 6,054 5,646 4,2813,354 (2,131) (1,760) (16,164) (2,023) (1,705) ,556) 37 (144) (8,599) 9,355) (18,395) (126)
Analyze each line and explain what it shows you.

Answer 1

This is a Cash flow statement. The cash flow statement shows details of all cash inflows and all cash outflows of a company for a particular period.

This statement is divided in three parts :

1. Operating Activities:- This part include inflows and outflows of cash from business activities or business operations. Such as Profit related, Debtors - Creditors related, income - expense related, etc.

2. Investing Activities:- This part include cash inflows and cash outflows from company's investments. Such as Purchase & Sale of investments, fixed assets, capital assets, etc.

3. Financing Activities:- This part include cash inflows and cash outflows from Banks, investors or Shareholders. Such as issue if shares, Loan from Banks, Dividend paid, etc.

Now, coming to statement given in question, first we start with Operating Activities –

• From the Net Earning, all non-cash items (Like Depreciation, Deferred tax, etc.) removed so that we can see cash profit from net earning.
• Then effect is made of other operating activities like, increase/decrease in Accounts receivable/Accounts payable and other Current assets/Current liabilities.
• After above adjustments, resulting figure is Cash flow from Operating activities.

Now, we start looking in Investing activities –

• Purchase of Investment is Cash outflow, hence reduced and Sale of investment & Maturity is Cash inflow, hence added. Similarly, effect are made for other fixed asset’s inflow & outflow.
• This will result to Cash from investing activities.

Now we will calculate Financing Activities –

• Share purchased, Repayment of debt/commercial paper, Dividend paid, all are cash outflow, hence mentioned in negative and Proceeds from shares, Loans, debt & other proceeds are cash inflow, hence added in statement.
• This will result to Cash flow from Financing Activities.

Now, we will add Cash flow from Operating activities, Investing activities & Financing activities to get Net Increase/decrease in cash flow during the year.

Now we will add this ‘Net Increase/decrease’ to the opening cash balance, and it will result us to the closing cash balance.

There are few supplemental cash flow & non-cash flow items, which are shown just for disclosure purpose.