Case - Statement of Cash Flow: Three Examples

The net income was negative from 1989 to 1991. The net income is negative due to the depreciation costs. Operating

Funding for More Vino LTD is mainly derived from Arthur Greenway and Moore who has a 2/3 ownership stake in the company and over 1,500,000 in bank loans. The balance sheet shows $1,646,920 in total liabilities for 2007. They also have shareholder loans, which is an injection of capital, or debt capital, in a form of a loan. Their accounts payables are also extremely high because they are relying on credit purchases as a short-term loan. This can be risky for long term funding needs. The accounts payable is also why their current ratio is at a decreasing rate of 3% in 2007 when it was 7% in 2006. The acid test ratio is at 0% for both years. More Vino is not very liquid, and this can be problematic. They must get their inventory to be able to sell faster because that is their most prized asset. The low current ratio and acid test ratio is very risky. They could possibly become bankrupt if they need to sell their fixed assets to pay for short-term dues.

After carefully reviewing the income statement, balances sheet and cash flow it seems that the company has a negative cash flow for 1998, so even before thinking about obtaining internal and external resources for long term investment, the company must assure resources for their own working capital.

As shown in the ratios chart, working capital has increased by $13M. Maturities of short-term investments and cash flow from operations are projected to be sufficient to sustain the company’s overall financing needs, including capital expenditures. The following corporate strategic plan identifies a project that needs financial backing.

Figure 7 shows how the cash-in from operating activities and cash out to investment activities are balanced through multiple accounting periods. Toyota have steadily increased profits between FY 2011 and FY 2015, but regarding FCF, it is a negative result except for 2015. It turned out that the investment was using more capital annually than the profit obtained from the business of the main business. Investing CF (-15,802,252 million yen) is larger for cumulative CF from 2011 to 2015 compared to operating CF (15,696,396 million yen), which is a deficit of -105,856 million yen in total. Even for each year, cash flow will be red in most of the year, excluding FY 2015 (Table 6). During this period, the organization is in the operating surplus and operating profit base is in surplus. Regardless of why the deficit is said, it seems to be said that the earnings have changed to assets other than cash. In addition, missing cash is covered by borrowing money, and the company almost finances the profit each year almost every

The five adjustments to net income before including the changes in operating assets and liabilities in the consolidated statement of cash flows of Hertz Global Holdings, Inc. are listed as follows;

The statement of cash flows outlines some of the changes to the capital structure. The company added $164.5 million in a consolidated loan facility, and it paid out $138.1 million in dividends. There were no share buybacks during the year. The company states in the annual report (p.4) that it intends to maintain a conservative gearing ratio. The company in this section attributes its increased borrowings to projects and opportunities on which it has embarked. These investments lie within the integrated retail, franchise and property system. One of the

Cash flow statements tax calculations and balance sheet for the 3 financial years ending 30 June 2015 - 2017

The cash outflows for investing activities of the company are primarily for capital expenditures and purchases of investments, whereas cash inflows are primarily provided from maturities of short-term investments. The amount of net cash used for investing activities is $454 million during the fiscal year 2011, $429 million during the fiscal year 2010 and $537 million during the fiscal year 2009, while maturities of short-term investments are $150 million, $600 million, and $125 million in fiscal year 2011, 2010 and 2009.

The company lost money almost every year since its leveraged buyout by Coniston Partners in 1989. The income generated was not sufficient to service the interest expenses of the company which stood at $2.62B in 1996. From Exhibit 1, we can say that interest coverage ratio computed as EBIT / Interest Expense was 1.31 in 1989 and has been decreasing over years and currently stands at 0.59. This raises a question of how the company can meet its interest payments without raising cash or selling assets.

The 1992 year-end cash balance does not meet the 5% optimal cash balance, thus there is no left-over cash which could be invested on marketable securities. However the projected 1993 year-end cash balance of 35,874 meets the optimal cash balance, with an excess of 25,108.75. These excess funds can be invested on marketable securities thus yielding a 7% profit (1,757.6). After paying taxes, the net profit from marketable securities is 1,054.56. Retained earnings would increase by this amount with a corresponding increase in cash and marketable securities.

The company’s day-to-day operations did not change significantly over the last few years. Average collection period, inventory turnover, accounts payable, accounts receivable as well as cash conversion cycle all went up and down over the last four years but mainly stayed in the same range. So, there is no any significant change in operations. Mr. Cartwright has a very sound control over operations of the firm. Therefore, I believe, the company needs few more years to recover from the debts

company had experienced a shortage of cash and had found it necessary to increase its borrowing

The purpose of the statement of cash flows is to summarize an entity’s cash flows from operating, investing, and financing activities during a period. Because it is concerned with activity for a specific period of time, the statement is similar to the

The project proposal will be critical analysed before it will established in South Korea. In the first assignment will looked in depth in political, country risk, FDI theories and motive for the project. In the second assignment, the cost of capital for the project was calculated, stating the risk for both the parent and subsidiaries.