Find four highlights for each financial document (Pros or cons) and describe how
ID: 2722457 • Letter: F
Question
Find four highlights for each financial document (Pros or cons) and describe how each reflects a company's health. Review the company as a whole and provide a letter grade for each financial document and the company as a whole.
Cash Flow Get Cash Flow for View: Annual Data | Quarterly Data AI numbers in thousands Period Ending Dec 31, 2015 Dec 31, 2014 Dec 31, 2013 Net Income 512,951 846,912 820,470 211,532 6,245 (67,464) (13,847) (88,497) 50,504 844,377 Adjustments To Net Income Changes In Accounts Receivables Changes In Liabilites Changes In Inventories Changes In Other Operating Activities Total Cash Flow From Operating Activities 244,928 286,168 (24,440) 201,033 (44,185) (16,529) 102,411 (26,279) 154,478 (1,017) 52,049 143,817 1,214,456 1,191,399 (329,707) 64,596 (212,144) (477,255) (345,947) (97,131) 419,495) Capital Expenditures (323,551) (16,000) 12,029) (351,580) Other Cash fows from Investing Activities Total Cash Flows From Investing Activities (862,573) (440,414) 451,509) 119,124 Dividends Paid Sale Purchase of Stock Net Borrowings Other Cash Flows from Financing Total Cash Flows From Financing Activities Effect Of Exchange Rate Changes Change In Cash and Cash Equivalents 476,132) (548,174) 254,305 (10,000) (755,162) (10,364) (28,325) (393,801) (155,369) 54,185 Activities (719,302) (446,589) (6,156) (743,654) 390,236Explanation / Answer
Cash flow statement is a statement which provides an understanding about how a firm is utilising its cash. Such as there basically 3 activities in cash flow statements. Those are operating activities, investing activities and financing activities. Through the preparation cash flow statement one can easily see through that how each activity is being financed in the firm and which of the activities are generating surplus of cashes. Cash flow statement tells us that how the cash is being utilised in the firm, is there any surplus from any of the activities. It helps us in cash management by telling us any deficiency in the cash in any of the activities.
Cash flow basically tells us that Application of cash, cash balance whether surplus or deficient.
It helps in cash management of the firm and helps in projection of future cash position of the company.
It clearly bifurcate the activities of the business and shows the usage and applicability of cashes in each of these activities.
It is a very important statement for stakeholders specially to the creditors since since it shows the cash position of the company.
Pros of cash flow statement could be like: it does not disclose any activity which do not include cash though the activity may holds a strong value in company financial health. Like risk analysis of debtors.
Another issue with cash flow statement is that it just tells us about the cash position of the firm but what about profit & loss of the firm, assets balance and liabilities of the firm, well, It ofcourse does not tell us anything about those.
It is an dependent statement which can be very effective when it is analysed with other financial statements. Another issue might be that it really does not tell us the exactly liquidity position of the firm since payments of creditors might be postponed to show the strong cash flow statement,hence it can be easily manipulated.
Income statement:
Income statement is that financial statement which tells us that how is firm doing in respect of earning profit. It calculates profit & loss of the firm. It is one of the most important financial statement. Income statement tells us how is firm doing? 2) income statement creates a basis for calculation of EPS 3) Mandatory document to disclose
It has some cons also : like it can be manipulated, some of its items are based on estimation like how much dep. Should be charged etc, which might not be correct in practicality. Window dressing is possible.
Balance sheet – balance sheet is an statement which shows all the assets of the firm and equivalent liabilities. Balance sheet is an important statement since it shows the financial position of the firm
It shows the total assets of the firm, total liabilities of the firm. It includes the equity capital of the firm. Sometime there are the argument that balance sheet does not show the true value of the assets, since assets taken here are based on historical value, dep charged on the assets does not reflect the tru value of it. It does not include the human capital, that is a big assets of the firm.
Review:
Cash flow of the company has sinked over the years mainly due to investment and financing activities of the firm . Balance sheet is looking good Its long term debt has reduced other liabilities have also reduced. Intangible assets has increased. Sales have been good, which is a good sign. Cost is in sync. Income statement also looks good. Over all this is accompany in which one can invest.
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