Cash Flow Versus Net Income Create an analysis of the cash flow and net income r

Question

Cash Flow Versus Net Income

Create an analysis of the cash flow and net income reporting using examples that you find to support your analysis. What are some of the historical trends in reporting and does your selected company choose to report cash flows and net income? How would reporting one over the other or both impact stakeholders? Reflect on how this choice impacts a company.

Reference:

https://www.sec.gov/cgi-bin/viewer?action=view&cik=732717&accession_number=0000732717-16-000147&xbrl_type=v#

Explanation / Answer

The company is AT&T Inc.

Analysis of cash flow and net income: AT&T has been developing positive cash flow from operations. Its cash flow from operations stood at $34,796 million in 2013, $31,338 million in 2014 and $35,880 million in 2015. The companies capital expenditure amount has been stable during the period 2013 to 2015. Capex was $20,944 million in 2013, $21,199 million in 2014 and $19,218 million in 2015. The company saw a substantial increase in cash outflow for acquisitions in 2015. In terms of financing activities, the company doubled its cash inflow from issue of long term debt. The amount was $15,926 million in 2014 and this more than doubled to $33,969 million in 2015.

The net income figures for different years were - 2013: $18,418 million, 2014: $6,442 million and 2015: $13,345 million. Net income in 2015 was positively impacted by the doubling of operating income in 2015. Total comprehensive income also increased susbtantially in 2015 to $10,618 million due to lower amortization of net prior service credit.

Historically, the trend has been to generate a positive cash flow from operations, negative cash flow from investing activities. Yes, AT&T does report cash flows and net income.

Reporting one  over the other will negatively impact the stakeholder as they will not be able to properly analyse the company and determine different financial ratios and its meaning and impact on AT&T's operations.

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