Compare the quality of cash flows from three major retailers Walmart (WMT) Amazon (AMZN) and eBay (EBAY) for 2013, 2014 and 2015. Go to one of the financial databases to recover the information on net income and operating cash flows. Use the ratio for Quality of Income = cash flows from operating activities / Net Income. Submit a table that completes the following. Rank each for the trends in the quality of income ratio. Which firm does the best at generating quality income? Provide a narrative on your conclusion.
Homework Answers
Answer: Formula of Quality of Income:
Quality of Income = Cash flow from operations / Net Income
Note: (All figures are in million)
| Amazon | 2013 | 2014 | 2015 |
| Cash flow from operations | 5475 | 6842 | 12039 |
| Net Income | 274 | -241 | 596 |
| Quality of Income | 19.98 | -28.39 | 20.19 |
Explanation- It indicates high quality income except in year 2014 that is a low quality income.
| Ebay | 2013 | 2014 | 2015 |
| Cash flow from operations | 4995 | 5677 | 4033 |
| Net Income | 2856 | 46 | 1725 |
| Quality of Income | 1.75 | 123.41 | 2.33 |
Explanation- It indicates high quality income in 2014 while in 2013 and 2015, it is moderate.
| Walmart | 2013 | 2014 | 2015 |
| Cash flow from operations | 28564 | 23257 | 25591 |
| Net Income | 16999 | 16022 | 16363 |
| Quality of Income | 1.68 | 1.45 | 1.56 |
Explanation- It indicates moderate to high quality income.
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