Question

Discussion Question 1: Statement of Cash Flows Select one publicly traded company. You may not select the same company as another student. Review the company's statement of cash flows for the last 3 years Post a response in 150 to 200 words to the following questions, providing specific details and examples to support your answer: . How do investors and stakeholders use the statement of cash flow? What does it indicate about the corporation's financial position? Did sources and use of cash change over the last 3 years? Note: Initial responses to the question are due by 11:59 p.m. (Eastern time) on Thursday. Respond to at least 3 students as to what you agree or disagree with in their answers. All responses must be posted by 11:59 p.m. (Eastern time) on Sunday.

Can someone please tell me how to answer these questions? Just a point in the right direction would be great... I chose Microsoft as a company so this is the statement of cash flows from Microsoft's website, I coud use some help answering the question i the first picture up top. Thank you!

Answer 1

Most Important Point to Note that : In the Question, Under Cash flow from Operation = Income Tax amount shown under ( 18.183) ---- This is WRONG . With help of negative flow of Income Tax, total operating cash flow can not be $ 43884 .

So , please note this point while analysis of cash flow

As per attached cash flow , We noticed following valid point :

1. Company was excellent performer in Year 2017 in terms of revenue $ 25,489
2. In the same year 2017 , we have noticed that Company incurred money towards Acqusition of company amount to $25,944. This is one of the factor , cash flow from Investment activity was high in 2017 ( $46,781 ) as compared with other Year .
3. Because of this Acquisition plus Normal business, Company purchased asset and incurred depreciation expenses higher .
4. In 2018 , We noticed that to continuation of business , we spend capital expenditure( $ 11,632)
5. Good sign is Company keep on paying dividend from its reserved on consistent basis . This is really excellent sign in companies cash flow ,
6. Due to major acquisition in 2017, company net Income has been dropped in 2018.
7. Another important point to note that
8. Good point to note that Company paying / clearing debt amount on a consistent basis and as compared with Year 2016 ,Company maintained low cash outflow in 2018 .
9. Company is keep on purchasing and selling Investment on YoY basis .
10. Cash flow Investment is showing high flow in 2018 mainly due to company is not Opt for “ any further proceeds from Debt “ – Which is very good sign . Company is trying to manage Internal Accrual to pay if liability .
11. Under Cash flow from Operating – Year 2018 , we noticed “ Income Tax “ showing a huge amount ( $ 18,183) . I think this is ONE off amount . We should not factor this amount in our decision making time .
12. Little concern is All current asset ( Inventory + AR) are showing increase in Cash flow – Which is not good sign along with Unearned revenue balance also increased ( mean company received money in advance but corresponding revenue not yet recognised )
13. I am confident that company will address this issue in near future and reduce burden accordingly
14. Going forward , I am expecting , company will start generating revenue from acquisition ( which was made in 2017) and this new business along with normal business definitely boost up Future cash flow .
15. Trust me Company maintained good cash balances in Earlier year + continuously paying debt + declared / paid dividend , this all Positive factor definitely give confidence among Shareholders .

I am quite confident that we can Invest in this company . Company definitely will grow in future and we have seen positive factor as discussed above . Most important , company is maintaining steady Net Income as well as +ve cash flow on YOY basis

Operating Cash flow		2018($)	2017($)	2016($)
Net Income		16,571	25,489	20,539
Adjustment to reconcile Net Income to Net Cash from Operation
Asset Impaired				630
Depreciation / Amortization		10,261	8,778	6,622
Stock based compensation exp		3,940	3,266	2,668
Net recognised gain		(2,212)	(2,073)	(223)
Deferred Income Tax		(5,143)	(829)	2,479
Change in Working capital
Account Receivable		(3,862)	(1,216)	562
Inventories		(465)	50	600
Other current assets		(952)	1,028	(1,212)
Other Long term assets		(285)	(917)	(1,110)
Account Payable		1,148	81	88
Unearned revenue		5,922	3,820	2,565
Income taxes		18,183	1,792	(298)
Other current Liabilities		798	356	(179)
Other long term Liability		(20)	(118)	(406)
Change in Working capital		20,467	4,876	610
Net Income from Operation		43,884	39,507	33,325
Financing
Proceeds from Short term Debt		(7,324)	(4,963)	7,195
Porceeds from issuance of Debt		7,183	44,344	13,884
Repayment debt		(10,060)	(7,922)	(2,796)
Common stock issued		1,002	772	668
Common stock Repurchsed		(10,721)	(11,788)	(15,969)
Common stock Dividend paid		(12,699)	(11,845)	(11,006)
Others		(971)	(190)	(369)
Net cash from Financing		(33,590)	8,408	(8,393)
Investment
Addition to properties		(11,632)	(8,129)	(8,343)
Acquisition of company		(888)	(25,944)	(1,393)
Purchase of Investemnt		(1,37,380)	(1,76,905)	(1,29,758)
Maturities of Investement		26,360	28,044	22,054
Sale of Investment		1,17,577	1,36,350	93,287
Securities lending		(98)	(197)	203
Net cash from Investment		(6,061)	(46,781)	(23,950)
Foreign Exchange		50	19	(67)
Net change in Cash / cash Equivalent		4,283	1,153	915
Cash + Cash Equivalent ( opening period)		7,663	6,510	5,595
Cash + Cash Equivalent @ Ending		11,946	7,663	6,510