Question

​What do the cash flow statements show? What does this mean for the future viability of the firm? How helpful is this analysis in understanding the company’s stock price performance?

BNL STORES STATEMENT OF CASH FLOWS (for the year ended January 31) (in 000s) 2002 2003 2004 2005 2006 2007 Cash flows from operating activities Net Income (loss) after taxes Adjustments for Amortization of property, plant and equipment 214,031 223,692 $256,927$283,466 $268,332 $238,738 51,013 60,830 65,217 71,712 55,616 265,044 279,308 313,798 56,871 344,296333,549 310,450 Changes in: Accounts receivable Inventories Prepaid expenses Accounts payable Corporate income taxes payable Deferred corporate income taxes 4,326 (156,618) (145,255) (1,447,109) (348,926) (400,786) (157,743) (61,630) (167,887) (92,513) (260,108) (258,887) (895) (2,631) (3,180) (3,701) (6,211) (1,417) 51,291 59,481143,412 (13,689) 67,391 74,497 130,56251,87492,662 2,644 87,150122,400 96,737 5,187 3,505 2,346 1,566 7,770 30,992 (106,568) (78,125) (1,470,026) (419,094) (481,564 Net cash from operating activities Cash flows from investing activities (Increase) or decrease in property, plant and equipmen Proceeds from sale of (acquisition of) other asset:s Net cash from investing activities Cash flows from financing activities Proceeds from (repayment of) notes payable Proceeds from (repayment of) long-term debt Proceeds from (repayment of) other liabilities Proceeds from issuing (repurchase of) share capital Dividends paid Net cash from (used in) financing activities Net increase (decrease) in cash and cash equivalents Opening balance, cash and cash equivalents Closing balance, cash and cash equivalents 296,036 172,740 235,673 (1,125,730) (85,545) (171,114) 103,240) (52,239) (67,997) 102,175) (109,429) (175,724) 287 485 (21,987) (57,155) (119,966) (176,808) (93,117) 185,310 (131,416) (232,879) (16,726)(124,569) (25,120) - 1,234,855 435,873 (58,844) - (50,023) 131,335) (53,216) (21,025) 651,768 2,542 875 1,566 1,220 502 (3,532) 18,272 66,146 150,136 (77,997) (50,226) 65,332 133,817) (141,166) (143,322 (95,537)( 74,723) (80,410) 101,347 97,408) (139,783 (119,416 971,045 223,958511,402 6,997107,409 30,625 (84,478) 152,950 254,297 169,819 254,297169,819 192,959 23,140 192,959 223,584230,581 223,584230,581 337,990

Answer 1

This cash flow statement show that the given firm has uneven cash flow trend from operations. Major factor for this is because its funds are stuck up in accounts receivables. The firm is not effectively managing the working capital. As per the yearly trend,the more sales or net income is there, the more amount of it gets piled up in accounts receivables. So, the firm has less cash to finance its operations. At the same time, the firm has invested some amount in capital assets and the firm is able to arrange the long term finance. As per the given trend, firm can generate cash from financing, and has the cash available to satisfy its long term obligations or claims.

For future viability, it can be said that though large amount is stuck in receivables for the firm, which it is gradually receiving, but it is able to generate sales/income, able to satisfy its long term commitments. Also, the firm is constantly paying or has the ability to pay dividends every year.So, the firm can be said to be viable.

Since, the firm is paying more dividends every year, so its stock price also has favourable movement.