Cash Flow Coursework (Coursework Sample)
The task was to prepare a Cash Flow Statement. The paper, therefore, came up with a Cash Flow Statement obtained from a Balance Sheet and an Income Statement. In addition to this, the paper went further to indicate whether the company has a Free Cash Flow. Also, it calculated both the Current Ratio and the Solvency Ratio of the firm.source..
Cash Flow Statement
Details Amount ($)Net Income 21+ depreciation4+ amortization1+ loss1Increase in accounts receivable(6)Decrease in inventory2+ Prepaid expenses8Decrease in accounts payable(7)Increase in salaries payable3Decrease in taxes payable (2)Decrease in other payables(1)Net operation cash flow24Investing Activities Purchase of PPE(11)Purchase of long term investments(4)Proceeds from sale of assets2Net investing cash flow(13)Financing ActivitiesIssue of stock4Issue of long term bonds6Payment of dividends(7)Net financing cash flow3Total Net Cash Flow14
The company indicates a positive cash flow of $ 14 after all its operations for the current year. The operating cash flow was $24, investing cash flow was -$13 while financing cash flow was $3. It is clear that the staff is committed to expanding the business given the amount of money spent on the purchase of PPE and long-term investments (Bragg, 49). Additionally, the organization focuses on increasing its capital requirement through the issue of shares and long-term bonds that formed the principal source of its finances during the year 2014. Besides, the management showed concern towards the shareholders by declaring dividends to them.
Free Cash Flow
FCF = cash from operations – capital expenditures
24 – 15 = $ 9
The above calculation indicates that the company has a free cash flow from its previous year’s operations of 9 dollars. It is an advantage since the organization can manage to keep some of its financial resources for future operations and even expansion. Besides, the firm seems to be making much profit from its activities given that it has a positive free cash flow even after using the money available for investing activities (Bragg, 50). Therefore, the firm should plan on how to use the free cash flow appropriately. For instance, the management could decide to reinvest some portion of the money while keeping the rest for any financial emergency.
Current ratio = current assets ÷ current liabilities
122 ÷ 65 = 1.88
132 ÷ 58 = 2.28
The current ratio for the years 2013 and 2014 indicate that the company can repay for its current liabilities using the current assets. For example, all the ratios are more than one; meaning that they are all desirable. Notably, the company also made an increase in the ratio in the year 2014. Initially, the ratio was 1.88 in 2013 but it rose to 2.28 in the year 2014. Therefore, the company had increased operations in the year 2014 as compared to the year 20...
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