Using Statement of Cash Flow Information to Assess Company Life-Cycle Stage

For each of the following cash flow amounts ($ millions), identify whether the company is in the introduc

tion, growth, maturity, or decline stage of its life cycle.

Company

Operating Cash Flow

Investing Cash Flow

Financing Cash Flow

a .. ...... .

$2,281

$(3,451)

$1 ,907

b .. ...... .

6,334

3,220

(2,008)

c .........

(405)

(1 ,728)

3,518

d .. .. . .. ..

3,702

(2,440)

1,330

e .. .......

70

2,005

815

f

. .. .... . . .

5

(530)

876

g . . .......

(2,580)

(4,200)

7,459

h . ..... ...

(409)

5,581

(2,406)

Compute a nd Interpret Cash Flow Ratios

Use the following infom1ation to compute and interpret cash flow ratios.

Company

Operating Cash Flow

Average Current Liabilities

CAPEX

a .. .......

$2,106

$6,581

$2,425

b .........

5,668

2,181

1,007

c .. .......

3,702

3,365

1,220

d .. .......

2,700

5,192

1,984

Required

a. Compute the operating cash flow to current liabilities ratio for each company. Compared to the average of

0.5 for large public companies, assess each company's liquidity as low, medium, or high (i.e., its ability

to settle liabilities as they come due).

b. Compute the operating cash flow to CAPEX ratio for each company. Compared to the rule of thumb of

1.0, assess the company's solvency as either low, medium, or high.