Premium Essay

Cash Flow Case

In: Business and Management

Submitted By xiaochong
Words 1342
Pages 6
Basic Concepts:
1. Company A: net change in Accounts Receivable: 1729.17 increase net change in Inventory: 568.98 increase net change in Accounts Payable: 124.54 increase
In other working capital accounts over the three years, other receivables increased 1427.68; prepaid expense & other assets increased 1588.43. Both current assets and liabilities are increasing, and net income is also increasing, which mean that the sales are increasing and the company is purchasing more inventories.
Company B: net change in Accounts Receivable: 36984.77 decrease net change in Inventory: 1710.78 decrease net change in Accounts Payable: 11999.03 decrease
No other working capital accounts showed significant changes over the three years. Both the current assets and current liabilities are decreasing, and net income is decreasing, which showed that the sales are decreasing and the company is purchasing fewer inventories, so the company may be contracting and shrinking the size of operations.
Company C: net change in Accounts Receivable: 804.95 increase net change in Inventory: 5673.58 increase net change in Accounts Payable: 1150.36 increase
In other working capital accounts over the three years, prepaid expenses & other current assets increased 758.72; accrued liabilities increased 2343.67; deferred revenue increased 897.78. The net income is decreasing while the company is purchasing more inventories, which indicates that the company might be just launched and have not started to generate profit.

2. Significant non-cash or non-operating adjustments:
Company A: Impairment charges, impairment of equity investment in joint venture, other than temporary impairment of investment, amortization of marketable securities, and purchase of trading securities.
Company B: Acquisition bargain purchase loss (gain), contingent…...

Similar Documents

Premium Essay

Accounting Cash Flow Questions 3, Case 45

...statements of cash flows? Blockbuster was reporting the cost of the buying DVDs in the investing part of the flow. However, after talking to the SEC they decided that these costs should be placed onto the operating cash flow. This had a large negative effect on their operating cash flows during the restatement periods 2. Read SFAS #95, paragraphs 24 and 85-87, and explain how this relates to Blockbuster. This is very similar to what the standard is referring to in paragraph 24. It is an asset that is rented out for a short period of time and then is sold when the movie become a little older. Paragraph 87 describes some of the situations in which classification is not totally clear. It says an item needs to be recognized based on the predominate source of cash flow. In this case the DVDs lead to rental revenue, which are part of the company’s operations. Read the article: “Quick Cash via Receivables Deals Can Leave a Blurry Fiscal Picture,” by Michael Rapoport, in Wall Street Journal, June 16, 2006, p. C3. 3. What “trick” can companies use to boost their operating cash flows, at least in the short run? Companies can securitize their accounts receivables. They bundle their receivables and then using an off-balance entity they sell these securities. The company will receive cash from these securities with the promise of paying back the investors when the customers pay the receivables. This allows them to increase operating cash flows and does not......

Words: 395 - Pages: 2

Premium Essay

Cash Flow

...CONCEPTS a. The statement of cash flows details the actual cash generated through a specific time period, usually for fiscal year ending 20XX, for example. The cash flow statement, specifically, identifies the actual cash flowing in and out of the company and reveals how a company spends its money. Conversely, the income statement is based on the accrual method of accounting and will contain revenue, for example, that has not been received or expenses that have not yet been paid. b. The two separate methods to prepare the statement of cash flows is the direct and indirect method. Weis Markets uses the indirect method of accounting due to the fact the company uses the accrual method of accounting and derives data from both the balance sheet and income statement. Most companies, public companies specifically, use the indirect method of accounting as most implement accrual accounting. Smaller companies on a cash basis would use the direct method for statement of cash flows. c. The three sections of the statement of cash flows is investing, operating, and financing activities. d. Operating activities pulls from items on the income statements. Investing activities reports the purchase and/or sale of investments and property, plant, and equipment on the balance sheet. Financing activities reports the issuance and repurchases of company stocks, bonds, and payments of dividends on the balance sheet. e. Cash equivalents are current, highly liquid assets......

Words: 532 - Pages: 3

Premium Essay

Cash Flow

...Cash Flow Greg George December 7, 2013 Cash flow statements are important for every business. Cash flow statements tell investors, banks, and the company’s management what is going on with the company’s cash. Investors want to know if a company can and if they have paid dividends and a cash flow statement can provide this kind of information. When banks look at giving a loan to a company they look at a lot of different statements and on of them is the cash flow statement. From a cash flow statement banks can determine if a company is handling there cash intake and out flow correctly. A cash flow statement can also show if a company is doing something shady with their money or taking unnecessary risks that would put investors and bank at risk of not getting their investment back. Cash flow statements are classified into three sections; operating, investing, and financing activities. Each section tells a different story inside the cash flow statement. The cash flow statement is separated into three sections so that investors and banks can get a better understanding of each part of the cash flow statement. Each section stands for the following; “Operating activities include the cash effects of transactions that create revenues and expenses. They thus enter into the determination of net income. Investing activities include (a) acquiring and disposing of investments and property, plant, and equipment, and (b) lending money and collecting the loans. Financing......

Words: 399 - Pages: 2

Free Essay

Cash Flow

...Chapter 12 Cash Flow Estimation and Risk Analysis LEARNING OBJECTIVES After reading this chapter, students should be able to: • Discuss difficulties and relevant considerations in estimating net cash flows, and explain the four major ways that project cash flow differs from accounting income. • Define the following terms: relevant cash flow, incremental cash flow, sunk cost, opportunity cost, externalities, and cannibalization. • Identify the three categories to which incremental cash flows can be classified. • Analyze an expansion project and make a decision whether the project should be accepted on the basis of standard capital budgeting techniques. • Explain three reasons why corporate risk is important even if a firm’s stockholders are well diversified. • Identify two reasons why stand-alone risk is important. • Demonstrate sensitivity and scenario analyses and explain Monte Carlo simulation. • Discuss the two methods used to incorporate risk into capital budgeting decisions. • List four different types of embedded real options, explain what a decision tree is, and provide an example of one. • List the steps a firm goes through when establishing its optimal capital budget in practice. LECTURE SUGGESTIONS This chapter develops procedures for estimating and identifying relevant cash flows, discusses techniques used to measure and take account of project risk, introduces the concept of real options, and discusses......

Words: 9165 - Pages: 37

Premium Essay

Cash Flow

...Jim DeMello Case 1- Signal Cable Company; Cash Flow Analysis Case 2- Bigger Isn't Always Better; Financial Ratio Analysis Case 3- Playing the Numbers Game!; DuPont Analysis Case 4-Growing Pains; Financial Forecasting Case 5- There’s More to Us Than Meets the Eye!; Financial Analysis and Forecasting Case 6- Lottery Winnings-Looks Can Be Deceptive; Time Value of Money Case 7- It’s Better Late Than Never!; Retirement Planning Case 8- Paying Off That Dream House; Loan Amortization Case 9- Wake Up and Smell the Coffee!; Time Value of Money Case 10- Corporate Bonds-They Are More Complex Than You Think; Bond Analysis and Valuation Case 11- How Low Can It Go?; Application of Stock Valuation Methods Case 12- What Are We Really Worth; Valuation of Common Stock Case 13- The Lazy Mower: Is It Really Worth It?; Estimating Cash Flow-New Project Analysis Case 14- If the Coat Fits, Wear it; Replacement Project Analysis Case 15- The Dilemma at Day-Pro; Comparison of Capital Budgeting Techniques Case 16- Too Hot to Handle; Capital Budgeting Case 17- Flirting with Risk; Risk and Return Case 18- I Wish I Had a Crystal Ball; Real Options and Capital Budgeting Case 19- Can One Size Fit All?; Determining the Cost of Capital Case 20- We Are Not All Alike; Divisional Costs of Capital Case 21- Where Do We Draw the Line?: Marginal Cost of Capital and Capital Budgeting Case 22- EVA ? Does It Really Work?; Economic Value Added (EVA) Case 23- It’s......

Words: 739 - Pages: 3

Premium Essay

Cash Flow

...Summary. 5) Suggestion and conclusion 1)INTRODUCTION i) Statement of problem:- Cash flow statement is a statement which describes the inflow and out flows of cash and cash equivalents in an enterprise during a specific period of time. Such a statement enumerates net effects of the various business transactions on cash & its equivalents and takes in to account receipts and disbursement of cash. Cash flow statement summaries the cause of changes in cash position of a business enterprise between dates of two Balance sheets. According to AS-3, enterprises should prepare a cash flow statement and should present it for each period for which financial statement are prepared. The terms cash, cash equivalents and cash flows are used in this statement which the following meanings:- 1. Cash: - Cash comprises cash on hand and demand deposit with bank. 2. Cash equivalents are short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of charge in value. Cash equivalents are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes. For an investment to qualify as a cash equivalent, it must be readily convertible to an insignificant risk of change in value. Therefore, an investment normally qualifies as a cash equivalent only when it has a short maturity of say, three months or less from the date of acquisition. For......

Words: 1439 - Pages: 6

Free Essay

Cash Flow

...1. Explain why investors should use the statement of cash flows. Cash flow is one of the most important measurements used by investors in valuing a company. You will hear the term used in the context of understanding how much a company is really growing (or not) after accounting conventions are stripped out of the income statement. Cash flow measures the amount of cash that a company brings in and uses during the course of an accounting period (quarter or year) after all fixed expenses are eliminated. This number is frequently called earnings before interest, taxes, depreciation and amortization (EBITDA). The reason investors are interested in cash flow is that it gives them a clearer picture of what the company is truly doing. Deductions When you begin deducting interest, taxes, depreciation and amortization, you distort what positive or negative cash flows the company’s operations generated. The four items (interest, taxes, depreciation and amortization) have nothing to do with the company’s actual operations and are accounting conventions for reducing income for tax purposes. Here’s how each one distorts operating performance: * Interest – Companies can deduct interest expense from their income for tax purposes. This deduction will change from year-to-year as more or less debt is on the books. * Taxes – Taxes are subject to change as laws change and the company’s business and accounting practices may change. This deduction also reduces net income. ...

Words: 1718 - Pages: 7

Premium Essay

Case - Statement of Cash Flow: Three Examples

...Case - Statement of Cash Flow: Three Examples Exhibit #1 Alpha Corp: In this example we have a case in which years 89, 90 and 91 net income is less than net cash provided by operating activities. One of the major reasons for this appears to have been depreciating high cost of equipment. The depreciation is trending downward over the three-year period indicating less long-term assets are being purchased/capitalized to run operations. While depreciation does not involve cash, it does impact net income. In addition, account payables have been decreasing over the last two years and significant cash has been used in the last year to pay the liability. In 1990 there are significant costs associated with restructuring activities. There were costs in all 3 years but 1990 was almost triple that of 89 or 91. Cash flow from operations did not cover investments in depreciable equipment, capitalized software or dividends paid for all three years. The difference was trending in that operations would soon be able to cover these accounts. Dividends paid out decreases over the three-year period and were not paid in 91. Investing in these types of assets decreased over the 3 years. Funds to cover these costs came from long-term debt as well as the sell of class B stock. It is important to point out that Alpha sold off more than it acquired in new depreciable assets. Alpha is also spending cash on long-term debt as a primary source of financing cash flow. It appears in the......

Words: 1076 - Pages: 5

Premium Essay

Cash Flow

...Cash Flow Assignment Companies are required to prepare a statement of cash flows (SCF) in their annual reports because it contains necessary information for external users, such as lenders and investors, who make economic decisions about the companies. It presents the sources and uses of cash and is a basis for cash flow analysis. Because it shows how much actual cash a company has generated, it presents if and how the company is able to pay for its operations and future growth. Companies produce and consume cash in different ways, so the cash flow statement is divided into three sections: cash flows from operations, financing and investing. Basically, the sections on operations and financing show how the company gets its cash, while the investing section shows how the company spends its cash. The cash flow statement is the newest of the three financial statements; companies have only been required to furnish investors with it since 1988. The cash flow statement is similar to the income statement, except that it dispenses with some of the abstract items found on the income statement (such as depreciation) and focuses on actual cash. Most of the information found on the cash flow statement is contained in either the income statement or the balance sheet, but here it is organized in such a way that it is difficult for companies to use accounting tricks to obscure the facts. The cash flow statement is broken down into three parts: Here you’ll find how much money the......

Words: 645 - Pages: 3

Premium Essay

Cash Flow

...Balance Sheet and Statement of Profit and Loss (Consolidated) STATUTORY REPORTS 44 Notice 53 Directors’ Report 69 Management Discussion & Analysis 104 Corporate Governance 125 Secretarial Audit Report Chairman’s Message To ensure long-term competitiveness of Tata Motors, the company also took several steps under the Horizonext strategy. FINANCIAL STATEMENTS Standalone Financial Statements 126 Independent Auditors’ Report 130 Balance Sheet 131 Statement of Profit and Loss 132 Cash Flow Statement 134 Notes to Accounts Consolidated Financial Statements 170 Independent Auditors’ Report 172 Balance Sheet 173 Statement of Profit and Loss 174 Cash Flow Statement 176 Notes to Accounts Subsidiary Companies 207 Financial Highlights 210 Listed Securities issued by Subsidiary Companies during FY 2013-14 14 Major Launches during the Year Our products represent the Horizonext philosophy with best-in-class offerings. 38 Summarised Balance Sheet and Statement of Profit and Loss (Standalone) 40 Funds Flow - Last Five Years 41 Financial Statistics 30 ANNUAL GENERAL MEETING Date Awards and Accolades Range Rover Sport won the SUV of the Year award by Top Gear magazine in the UK, EVO in MENA, Car and Drive in China. Thursday, July 31, 2014 Time 3.00 p.m. Venue Birla Matushri Sabhagar, 19, Sir Vithaldas Thackersey Marg, Mumbai 400 020 Horizonext, rolled out last year as a next-level strategy, helps us anticipate customer requirements and deliver exciting......

Words: 116965 - Pages: 468

Premium Essay

Cash Flow

... The Statement of Cash Flows Purpose of a statement of cash flows: To provide information about the cash inflows and outflows of an entity during a period. To summarize the operating, investing, and financing activities of the business. The cash flow statement helps users to assess a company’s liquidity, financial flexibility, operating capabilities, and risk. The statement of cash flows is useful because it provides answers to the following important questions: Where did cash come from? What was cash used for? What was the change in the cash balance? Specifically, the information in a statement of cash flows, if used with information in the other financial statements, helps external users to assess: 1. A company’s ability to generate positive future net cash flows, 2. A company’s ability to meet its obligations and pay dividends, 3. A company’s need for external financing, 4. The reasons for differences between a company’s net income and associated cash receipts and payments, and 5. Both the cash and noncash aspects of a company’s financing and investing transactions. What can we learn from SCF that is not already available in the other financial statements? It provides answers to important questions like: Where did cash come from? What was cash used for? What was the......

Words: 15863 - Pages: 64

Premium Essay

Sunset Medical: a Statement of Cash Flow Case

...Sunset Medical: A Statement of Cash Flow Case Scott Wandler* College of Business Administration University of New Orleans New Orleans, LA 70148 swandler@uno.edu Kevin Watson College of Business Administration Iowa State University Ames, IA 50011 kwatson@iastate.edu *Corresponding Author Abstract Medical is based on a real situation occurring at an Orthopedic Medical practice in Colorado. While attending a trade show Dr. Jones, the managing partner at Sunset Medical, was approached by a medical consulting firm, Physicians Medical Inc. (PMI), to provide the practice billing and administrative services. Dr. Jones decided to hire PMI and signed a contract in February of 2011. Based on the interim financial statements that were released in June of 2011, Dr. Jones gave PMI control of the overall day to day operations of the practice. PMI immediately relieved the office manager of her duties and took over all operations of the practice. In early 2012, the 2011 financial statements were released and were not as impressive as the mid-year results. Dr. Jones is now worried that the increased power given to PMI may have been a mistake and has asked you to give a full assessment of the situation. The case is suitable for an introductory Financial or Managerial Accounting class at the M.B.A. level once the students have a working knowledge of the financial statements. The students must critically evaluate contract language ......

Words: 2829 - Pages: 12

Premium Essay

Cash Flow

...CASE 2 STATEMENT OF CASH FLOWS Soul Silver Company’s comparative balance sheet and income statement for last year appear below: BALANCE SHEET Ending Beginning Balances Balances Cash P 62,000 P 38,000 Accounts receivable 85,000 66,000 Inventory 31,000 44,000 Prepaid expenses 0 4,000 Long-term investments 260,000 210,000 Plant and equipment 450,000 450,000 Accumulated depreciation (255,000) (219,000) Total Assets P 633,000 P 593,000 Accounts payable P 33,000 P45,000 Accrued liabilities 36,000 18,000 Taxes payable 17,000 24,000 Bonds payable 150,000 190,000 Deferred taxes 41,000 24,000 Common stock 130,000 100,000 Retained earnings 226,000 192,000 Total Liabilities & Equity P 633,000 P 593,000 INCOME STATEMENT Sales P 610,000 Less: Cost of goods sold 330,000 Gross margin 280,000 Less: Operating expenses 180,000 Net operating income 100,000 Less: Income taxes 30,000 Net income P 70,000 The company declared and paid P36,000 in cash dividends during the year. Required: Prepare a statement of cash flows. Heart Gold Company’s comparative balance sheet and income statement for last year appear below: BALANCE SHEET Ending Beginning Balances Balances Cash P 60,000 P 25,000 Accounts receivable 48,000 61,000 Inventory 56,000 48,000 Prepaid expenses 13,000 19,000 ...

Words: 370 - Pages: 2

Premium Essay

Cash Flows

...Direct Method: ABC Company Direct Statements of Cash Flow for December 31, 2013 © www.excel-skills.com 2013 Cash flows from operating activities Cash Sales 4,523.00 Collections on Receivables 6,739.00 Purchases (1,332.00) Cash paid to employees (wages) (987.00) Cash paid to suppliers (1,028.00) Cash generated from operations 7,915.00 Interest payments (12.00) Tax Payments (275.00) Net cash from operating activities 7,628.00 Cash flows from investing activities Capital Expenditures (1,389.00) Payments for Businesses Acquired (206.00) Proceeds from Sales of Property and Equipment 88.00 Net cash used in investing activities (1,507.00) Cash flows from financing activities Proceeds from Long-Term Borrowings 5,222.00 Repayments of Long-Term Debt (1,289.00) Repurchases of Common Stock (8,546.00) Proceeds from Sales of Common Stock 241.00 Cash Dividends Paid to Stockholders (2,243.00) Other Financing Activities (37.00) Net cash used in financing activities (6,652.00) Net increase (decrease) in cash (531.00) Indirect Method: ABC Company Indirect Statements of Cash Flow for December 31, 2013 © www.excel-skills.com 2013 Cash flows from operating activities Profit before taxation 8,467.00 Adjustments for: Depreciation 1,627.00 Investment......

Words: 428 - Pages: 2

Premium Essay

Cash Flows

...“Financial Accounting, sixth edition”, cash flow “permits a company to expand operations, replace worn assets, take advantage of new investment opportunities, and pay dividends to its owners”. Analyzing cash flow enables one to understand what happened to cash and cash equivalents throughout a specific period – how to the beginning balance of cash become the ending balance. The statement classifies cash flow in three different categories; operating activities, investing activities, and financing activities. To better understand and prepare the statement manipulating the balance sheet equation is a must. Assets can be further broken down into cash/cash equivalents and noncash asset. It is important to note that any change in cash also results in a change of liabilities, stockholder’s equity or noncash assets. With all of this, the “new” equation follows, change in cash = change in liabilities + change in SE – change in noncash assets. Cash flows from operating activities relate directly to revenues and expenses on the income statement. Examples of cash inflow activities include cash received from customers, dividends and interest on investments. Examples of outflows would be salaries, wages and income taxes. There are two methods in which one can present operating activities on the statement. It is important to note that both methods will provide the same number. The first is the direct method. This method “reports components of cash flow as gross receipts and......

Words: 1340 - Pages: 6

Travel Guides | Game of Thrones S03E07 BluRay 1080p x264 ESub [Dual-Audio][Hindi+English] KMHD-Fixed | Pasjeshouders