Questions 1. Examine the contents of the three cash flow statements carefully and analyze the situation for each of the three companies. When answering the following questions, please provide a qualitative assessment of major accrual and cash flow components (there is no need for specific numbers). For example, to answer the question Increase in working capital? indicate if the capital increased, decreased, or did not materially change, and then explain which component of working capital contributed most significantly to the change for each of the years. a. List major sources of cash b. List major uses of cash c. Is cash from operations greater than net income? d. List the major reasons for the difference between cash from operations and net income e. Is cash from operations greater than capital expenditures? f. Is cash from operations less than capital expenditures? And how did the company finance their capital expenditures? g. What is the trend in net income? h. What is the trend in cash from operations? i. What is the trend in capital expenditures? j. What is the trend in working capital? 2. Based on your analysis above, what is your overall assessment of the cash flow situation for each company? Please rate each company on a scale of 1 to 5, where 1 indicates that the corporation will declare bankruptcy next year, 3 represents a reasonable cash flow situation with only a few problems noted, and 5 represents an outstanding cash flow situation. Exhibit 1 Company A, Consolidated Statements of Cash Flows ($ millions) 2017 2016 2015 S (383) $ (2,221) $ (1,128) 765 CASH FLOWS FROM OPERATING ACTIVITIES Net loss Adjustments to reconcile net loss to net cash used in operating activities: Tax valuation allowance Depreciation and amortization Impairment charges Gain on sales of assets Pension plan contributions and settlements Other Change in operating assets and liabilities: Inventories Accounts Payable Deferred Income Taxes Other operating assets Other operating liabilities Net cash used in operating activities (1,395) 378 142 (1,648) 167 (19) 368 427 (247) (334) 15 217 430 274 (743) (311) 66 1,144 (472) 670 51 1,213 (526) (907) (52) (229) (47) (614) 54 (136) (2,167) (477) 118 (1,842) (1,381) 386 2,730 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sales of property and investments Proceeds from Business Unit Proceeds from sales of receivables Purchases of property and equipment Net cash provided by investing activities 1,109 572 293 (80) 1,894 (142) 244 (211) 2.519 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from debt issuances Repayments of debt Increase (decrease) in short-term borrowings Proceeds from sale-leaseback financing Debt issuance costs Net cash provided by (used in) financing activities 1,020 (1,356) 271 106 2,028 (66) (797) 71 (1,405) 583 508 (43) (51) (50) 1,185 (364) NET INCREASE (DECREASE) IN CASH CASH, BEGINNING OF YEAR CASH, END OF YEAR 48 238 286 (12) 250 238 $ $ Source: Company 10-K
