Examine the company’s Statement of Cash Flows for the 2017 and 2016. Does the co

Question

Examine the company’s Statement of Cash Flows for the 2017 and 2016. Does the company generate sufficient cash from operating activities to financing its investing activities? If not, discuss how the cash deficiency is met.

2017 2016 2015 Operating Activities Net income Adjustments to reconcile net income to cash provided by operating activities Change Cash provided by operating activities Investing Activities Additions to property, plant and equipment Other assets and intangible assets Cash used in investing activities Financing Activities Proceeds from long-term debt obligations Repayment of, and finance costs on, long-term debt obligations Proceeds from (repayment of) short-term debt obligations Dividends Issuance of common shares 327 323 1,270 941 127 Note 10 826 72 877 60 1,260 s in non-cash operating working capital Note 10 1,225 2,338 (651) (1,217) (67) (893) (652) (895) (1,284) 496 494 (502) (19) (1,204) 53 1,178) (501) 341 (330) (128) (809) 25 (424) (59) 91 (489) 84 32 Cash used in financing activities Increase (Decrease) in Cash and Cash Equivalents Cash and Cash Equivalents, Beginning of Year Cash and Cash Equivalents, End of Year Cash and cash equivalents comprised of Cash Short-term investments 215 $ 116 32 91 $ 14 13 30 61 116 32 91 102 19 See Notes to the Consolidated Financial Statements

Explanation / Answer

We know that free cash flow (FCF) = Operating cash flow – capital expenditures.

Capital expenditures in this case = additions to property, plant and equipment (PPE)+other assets and intangible assets purchases. These items are shown in the investing activities of the cash flow section.

If FCF>0 it will mean that the company is able to generate cash from operating activities that is sufficient for its investing activities.

As we can see that the FCF is positive for all the three years and so the company is generating sufficient cash  from operating activities to fund its investing activities.

YEAR 2017 2016 2015 Cash provided by operating activities 1,225.00 1,260.00 2,338.00 less: capital expenditures 652.00 895.00 1,284.00 Free cash flow 573.00 365.00 1,054.00

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