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Financial Analysis 7

The cash flow statement for 2019 showed a positive change in cash balance of $40,000 due to cash flows from operating, investing, and financing activities. Cash from operating activities was $126,000 due to net income and decreases in inventory and accounts receivable. Cash from investing activities had an outflow of $33,000 for purchasing equipment. Cash from financing activities had an outflow of $53,000 for redeeming bonds and paying dividends. Cash from operating activities absorbed the outflows from investing and financing with an excess of $40,000, increasing the ending cash balance to $73,000.

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37 views2 pages

Financial Analysis 7

The cash flow statement for 2019 showed a positive change in cash balance of $40,000 due to cash flows from operating, investing, and financing activities. Cash from operating activities was $126,000 due to net income and decreases in inventory and accounts receivable. Cash from investing activities had an outflow of $33,000 for purchasing equipment. Cash from financing activities had an outflow of $53,000 for redeeming bonds and paying dividends. Cash from operating activities absorbed the outflows from investing and financing with an excess of $40,000, increasing the ending cash balance to $73,000.

Uploaded by

Shimaa Mohamed
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© © All Rights Reserved
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Cash Flow statement Report

 The statement of cash flow for the year 2019 had revealed a positive change in the

cash balance along the year with a value of +40000 as a result of the cash flow

from operating ,investing ,and financing activates

 For the cash flow from operating activities cash outflows were due to payout or

decrease of A/P ,and more A/R ,while the cash inflows were due to net income

which is also the main reason for the net cash inflow of 126000 due to operating

activities beside the decrease in inventory .We had to calculate the quality of

income ratio to evaluate the ability of the net income to generate cash flow from

operating activities ,such ratio had shown that every 1 pound on net income had

been able to generate 1.22 pounds and this is a good sign

 For the cash flow from investing activities cash outflows had been due to

purchasing equipment while the inflow had been due to sale of land ,the purchase

of equipment was the main reason for the 33000 net cash outflow While

considering the cash flow from investing activities, there had been a net cash

outflow of 33,000. The method of financing the purchase of property ,plant ,and

equipment is the cash flow from operating activities as the capital acquisition

ration was greater than 1,this says that the firm did not depend on any other

sources example liabilities or equity

 For the cash flow from financing activities the cash outflows had been due to

paying dividends and redeeming bonds ,while cash inflows had been due to

issuance and selling ordinary shares ,the main reasons behind the 53000 net cash
out flow from financing activities was redeeming bonds and paying cash

dividends.

 Accordingly this shows that cash flow from operating activities inflows has

absorbed the cash outflow from both investing and financing activities with an

excess of 40000 that had increased the cash ending balance to be 73000

Ratios

A. Quality of Income ratio = Cash from operating activities/Net income

=126000/103000 =1.223

 Every 1 dollar of net income generates 1.223 dollars of cash flow from operating

activities

B. Capital Acquisitions ratio = Cash from operating activities/Cash paid to

property ,plant and equipment = 126000/60000=2.1

 The ratio > 1 reflecting that net cash inflow from operating activities are enough

to pay for P,P&E away from using debt or equity

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