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examine the relative information content of income statement and statement of cash flows. Why do investors find both income statement and statement
examine the relative information content of income statement and statement of cash flows. Why do investors find both income statement and statement of cash flows useful? Part B
Appendix A, B, and C contain cash-flow statements from three companies. Each cash-flow statement has Three years of data. Examine the contents of these cash-flow statements carefully. Answer the following questions about each of the three cash-flow statements.
1. For each of the three years on the Statement of Cash Flows:
a) What are the major sources of cash for each firm? What are the major uses of cash for each firm?
b) What was the trend in cash flow from (continuing) operations for each firm?
c) Was cash flow from operations greater than or less than net income? Explain in detail the major reasons for the difference between these two figures. (Answer this question using only Appendix B: Cash flow statement for BHP Limited).
d) Was the firm able to generate enough cash from operations to pay for all of its capital expenditures?
e) Did the cash flow from operations cover both the capital expenditures and the dividend payments made by the firm (if any)?
f) If the firm has generated excess cash from operations, how did the firm invest the excess cash? If not, what were the sources of cash the firm used to pay for the capital expenditures and/or dividends?
g) Did the firm use the working capital (current asset and current liability) accounts other than cash and cash equivalents as sources of cash, or uses of cash? (Answer this question using only Appendix B: Cash flow statement for BHP Limited).
h) What other major items affected cash flows?
i) What was the trend in capital expenditures for each firm?
j) What was the trend in dividends (if any) for each firm?
k) What was the trend in net borrowing (proceeds from borrowing less payments of short- and long-term debt) for each firm?
l) What was the trend in working capital accounts? (Answer this question using only Appendix B: Cash flow statement for BHP Limited).
2. Critically evaluate the financial strength of each of the three companies based on the evidence presented in the Statement of Cash Flows.
3. If you are asked to evaluate these three companies for lending purposes, which of the three companies you will select for lending? Explain Why.
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HI5020 Corporate Accounting Group Assignment T1 2019
Appendix A: Funtastic Limited, Consolidated Cash Flow Statement for the year ended 30 June 2018
2018
2017
2016
Cash Flows from Operating Activities
AU$000
AU$000
AU$000
Receipts from customers
46,463
61,731
94,773
Payments to suppliers and employees
(54,777)
(60,897)
(98,145)
Cash (utilised)/generated from operations
(8,314)
834
(3,372)
Income taxes refunded/(paid)
49
(25)
(163)
Interest and other costs of finance paid
(1,917)
(3,559)
(3,794)
Net cash outflow from operating activities
(10,182)
(2,750)
(7,329)
Cash flows from investing activities
Interest and other investment income received
2
439
651
Payments for plant and equipment
(145)
(888)
(884)
Payments for other intangible assets
(281)
(540)
(325)
Proceeds from sale of international subsidiary
126
-
-
Net cash outflow from investing activities
(298)
(989)
(558)
Cash flows from financing activities
Proceeds from borrowings
2,630
3,647
7,457
Repayment of commercial bills
-
-
(1,000)
Proceeds from share issue
8,355
-
1,111
Costs from share issue
(438)
-
-
Net cash inflow from financing activities
10,547
3,647
7,568
Net increase/(decrease) in Cash Held
67
(92)
(319)
Cash and cash equivalents at the beginning of the year
664
764
904
Effects of exchange rate changes on the balance of cash held in foreign currencies
(13)
(8)
179
Cash and cash equivalents at the end of the year
718
664
764
Appendix B: BHP Limited, Consolidated Cash Flow Statement for the year ended 30 June 2018
2018
US$M
2017
US$M
Restated
2016
US$M
Restated
Operating activities
Profit before taxation
14,751
11,137
1,791
Adjustments for:
Depreciation and amortisation expense
6,288
6,184
6,210
Impairments of property, plant and equipment, financial assets and intangibles
333
193
186
Net finance costs
1,245
1,417
1,013
(Profit)/loss from equity accounted investments, related impairments and expenses
(147)
(272)
2,104
Other
597
194
467
Changes in assets and liabilities:
Trade and other receivables
(662)
267
1,387
Inventories
(182)
(687)
521
Trade and other payables
719
512
(1,272)
Provisions and other assets and liabilities
7
(333)
(316)
Cash generated from operations
22,949
18,612
12,091
Page 4 of 11
HI5020 Corporate Accounting Group Assignment T1 2019
Dividends received
709
636
301
Interest received
290
164
128
Interest paid
(1,177)
(1,148)
(829)
Settlement of cash management related instruments
(292)
(140)
−
Net income tax and royalty-related taxation refunded
17
337
435
Net income tax and royalty-related taxation paid
(4,935)
(2,585)
(2,286)
Net operating cash flows from Continuing operations
17,561
15,876
9,840
Net operating cash flows from Discontinued operations
900
928
785
Net operating cash flows
18,461
16,804
10,625
Investing activities
Purchases of property, plant and equipment
(4,979)
(3,697)
(5,707)
Exploration expenditure
(874)
(966)
(752)
Exploration expenditure expensed and included in operating cash flows
641
610
419
Net investment and funding of equity accounted investments
204
(234)
(217)
Proceeds from sale of assets
89
529
93
Proceeds from divestment of subsidiaries, operations and joint operations, net of their cash
34
− 187
166
Other investing
(141)
(153)
(20)
Net investing cash flows from Continuing operations
(5,060)
(3,724)
(6,018)
Net investing cash flows from Discontinued operations
(861)
(437)
(1,227)
Net investing cash flows
(5,921)
(4,161)
(7,245)
Financing activities
Proceeds from interest bearing liabilities
528
1,577
7,239
(Settlements)/proceeds from debt related instruments
(218)
36
156
Repayment of interest bearing liabilities
(4,188)
(7,114)
(2,781)
Purchase of shares by Employee Share Ownership Plan (ESOP) Trusts
(171)
(108)
(106)
Dividends paid
(5,220)
(2,921)
(4,130)
Dividends paid to non-controlling interests
(1,582)
(575)
(62)
Net financing cash flows from Continuing operations
(10,851)
(9,105)
316
Net financing cash flows from Discontinued operations
(40)
(28)
(32)
Net financing cash flows
(10,891)
(9,133)
284
Net increase in cash and cash equivalents from Continuing operations
1,650
3,047
4,138
Net (decrease)/increase in cash and cash equivalents from Discontinued operations
(1)
463
(474)
Cash and cash equivalents, net of overdrafts, at the beginning of the financial year
14,108
10,276
6,613
Foreign currency exchange rate changes on cash and cash equivalents
56
322
(1)
Cash and cash equivalents, net of overdrafts, at the end of the financial year
15,813
14,108
10,276
Appendix C: Santos Limited, Consolidated Cash Flow Statement for the year ended 31 December 2018
2018
US$M
2017
US$M
2016
US$M
Cash flows from operating activities
Receipts from customers
3,740
3,217
2,708
Dividends received
6
12
12
Pipeline tariffs and other receipts
106
66
60
Payments to suppliers and employees
(1,816)
(1,611)
(1,600)
Restoration expenditure
(36)
(37)
(17)
Exploration and evaluation seismic and studies
(98)
(71)
(68)
Royalty and excise paid
(85)
(57)
(34)
Borrowing costs paid
(194)
(254)
(226)
Income taxes paid
(69)
(28)
(17)
Royalty-related taxes paid
(13)
(15)
(4)
Other operating activities
37
26
26
Net cash provided by operating activities
1,578
1,248
840
Cash flows from investing activities
Exploration and evaluation assets
(66)
(146)
(128)
Oil and gas assets
(490)
(483)
(500)
Other land, buildings, plant and equipment
(10)
(5)
(4)
Acquisitions of oil and gas assets
(10)
(49)
(18)
Proceeds from disposal of non-current assets
26
145
447
Acquisition of subsidiary, net of cash acquired
(1,933)
-
-
Costs associated with acquisition of subsidiaries
(10)
-
-
Proceeds from disposal of subsidiaries
126
-
Borrowing costs paid
(6)
(6)
(20)
Other investing activities
-
10
18
Net cash used in investing activities
(2,373)
(534)
(205)
Cash flows from financing activities
Dividends paid
(73)
-
(43)
Drawdown of borrowings
1,193
783
-
Repayment of borrowings
(220)
(2,442)
(147)
Net proceeds from issues of ordinary shares
-
149
733
Purchase of shares on-market (Treasury shares)
(10)
(8)
Net cash provided by/(used in) financing activities
890
(1,518)
543
Net increase/(decrease) in cash and cash equivalents
95
(804)
1,178
Cash and cash equivalents at the beginning of the period
1,231
2,026
839
Effects of exchange rate changes on the balances of cash held in foreign currencies
(10)
9
9
Cash and cash equivalents at the end of the period
1,316
1,231
2,026
