Question

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

Operating Activities * Discuss the trend in the cash flows from operating activities.

How could the company improve their ability to generate cash flow internally?

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).

Mode Layout Layout Tools to Side U Navigatloh Pahe Page Width Window All Reset Window Position Windows Views Show Zoom Immersive Page Movement slal INICIIL OILASI TIU V Window Dollar Amount ( Millions) 2018 2017 2016 3,433 $ 5,560 $ 15,308 $ 21,053 $ 9,601 $ 10,316 7520 1546 6,266 1,444 1,524 (432) 1565 For the year ending December 31 Operating Activities Cash and cash equivalents, beginning of period Cash flow provided by operating activities Net Income Adjustments to reconcile net income to net cash: Depreciation Share-based compensation Amortization of intangibles Gain losses on equity investments, net Loss on debt conversion and extinguishment Gain losses on divestitures Deferred taxes Changes in assets and liabilities: Account receivable Inventories Account payable Accrued compensation and benefits Customer deposit and prepaid supply agreements Income taxes payable and receivable Other assets and liabilities Totaladjustments Net cash provided by operating activities Double-click or double-tap to Edit Microsoft Excel Worksheet 6,752 1,358 1,377 (2,583) 476 (387) 1,548 155 260 -497 -1749 257 65 119 182 291 - 1714 -214 211 -260 1367 148 41 8,379 $ 29,432 $ (781) (1,300) 191 311 1,105 5,230 (788) 12,509 22,110 $ $ $ $ 1,382 394 11,492 21,808

Answer 1

Answer: Here we have information of cash flow statement of a company for the year 2016, 2017 & 2018. we need to: - Discuss the trend of Cash Flows from operating activities (OA) - How could the company improve their ability to generate cash flow internally Lets Present Cash flows from operating activities as below: 2018 2017 Cash Flows from OA $ 29,432 $ 22,110 $ Growth YOY 3 33.196 3.196 1 .496 2016 21,808 NA Lets Discuss the trend of Cash Flows from operating as follows: - Year 2017 having growth of 1.4% over previous year, while in 2018, growth is 33.1% showing good improvement - however if we see net income of company, we see growth of 119% in 2018 and while negative growth in 2017 of 7%. - so in 2017 despite of degrowth of 7% in income over previous year figure, company able to generate 1.4% growth in cash flows from OA. - and in 2018, even having growth of 119% in income, they generate 33% growth in Cash flows from OA - it denotes, in 2017, company generated cash flows from extra-ordinary activities happened in the year and 2018 it was not there - below are major positive factors in 2017 for generating more cash flows: - income tax received $5230 Mn against previous year figure of $1382 Mnit might be refund for previous years) - Customer deposit received $1105 mn against NIL value previous year - below are major negative factors in 2017 limiting generation of cash flows: - Gain on equity investment/disinvestment of $2583+$387 mn and represent actuals income is much lesser than $9601 mn in year - Increase of Credit receivables by $781 mn - Increase of inventory by $1300 mn - increase in other assets by $ 788 Mn - In 2018, company generates goods profits despite of not having gains from investment etc, which resulted more cash flows - however in 2018, company faces below hurdies. - Deferred tax Assets / reversal of Deferred liability of previous years - $ 1749 Mn - Increase of Credit receivables further by $1714 mn - Increase of inventory further by $214 mn - Compensation & benefits payment for previous years - $ 260 Mn - No major tax refunds like as in 2017

Advise to company to generate more cash flows internally: Company can look below internal areas and control to generate more cash flows in future: - As observed, company has blocked its funds of $ 4009 in Receivable & Inventory in 2017 & 2018. Company should analysis these areas and to identify - Recovery from receivables if due -re-frame over credit policy for customers - Control over Debtors-Turnover ratio and to ensure to have the ratio in desired range - Try to reduce excessive inventory - Scrap sale of obsolete inventory, if any and to control slow-moving inventory - Try to have more credit period for vendors to possible extent to have more liquidity in hand - Look over its Tax receivables, and to recover at maximum to possible extent, if any, taking help of professionals Other areas like, Gains from investment, depreciation, shared based payments are out of preview of internal controls for operating cash flows.

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