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PART I
Major Sources and Uses of Cash
Alpha Corporation
ALPHA CORPORATION (All figures in $ millions)
Sources
1991
Increase in short term borrowings
Proceeds from disposable of depreciable and other assets
Proceeds from the sale of discontinued operation
Proceeds from long term debts
Proceeds from sale of class B common stock
Other
Uses
Investment in depreciable assets
Investment in capitalized software
Other
Decrease in short term borrowings
Payment of long term debt
Dividend paid
Purchase of treasury of stock
1990
1989
157.00
25.30
44.40
5.00
-
242.00
407.30
167.70
8.70
-
139.80
94.10
305.00
17.50
14.20
1991
1990
1989
(129.70)
(27.80)
(6.00)
(2.60)
(126.50)
(0.30)
(174.40)
(43.10)
(13.00)
(222.60)
(554.80)
(7.20)
(0.60)
(303.60)
(59.50)
(91.70)
(26.00)
(18.80)
Beta Corporation
BETA CORPORATION (All figures in $ thousands)
Sources
1991
1990
1989
83865
23082
1991
(6031)
(8000)
-
73273
141
1990
(4600)
(2000)
51110
4400
639
1989
(3650)
(860)
(985)
(126)
(388)
(169)
(5000)
(213)
-
(276)
-
Gamma Corporation
GAMMA CORPORATION (All figures in $ thousands)
Sources
1991
1990
Proceeds from issuance of debt
14,249
17,661
Issuance of treasury shares, including tax benefits
239,653 296,225
Uses
1991
1990
Payments to retire debt
(112,426) (20,896)
Purchase of treasury shares
(240,719) (270,231)
Purchase of plant, property and equipment
(737,548) (1,027,625)
Increase of other asset net
(55,782) (75,489)
Purchase of Kinley business
(233,261)
-
1989
40,425
230,733
1989
(153,245)
(814,958)
(1,223,038)
(67,642)
-
PART I
Major Sources and Uses of Cash
1991
($377.90)
$125.20
1990
($623.50)
$89.30
1989
($320.60)
$46.80
Answer YES
Difference is attributed to (1991)
Depreciation: Non Cash, hits Net Income
Inventory
Accounts Receivable
Restructuring and Other Unusual Items, Net
1991
$6,323
$3,919
1990
$5,201
$7,000
1989
$417
$3,670
1991
($617,427)
$1,040,901
1990
($74,393)
$1,434,074
1989
($1,072,610)
$1,479,391
Answer YES
Difference is attributed to (1991)
Depreciation: Non Cash, hits Net Income
Decrease in Accounts Receivable
Increase in Deferred Revenue and Customer Advances
Increase in Restructuring Reserve
Increase in Other Liabilities
PART I
Major Sources and Uses of Cash
Alpha Corporation
Particulars
Operating activities
Capital expenditure
1)Investment in depreciable assets
2) Investment in capitalize software
3) Other
1991
$125.20
($163.50)
($129.70)
($27.80)
($6.00)
1990
$89.30
($230.50)
($174.40)
($43.10)
($13.00)
1989
$46.80
($348.90)
($303.60)
($59.50)
$14.20
No, the firm was not able to generate cash from operating activities because there was
a huge investment made in depreciable assets
Beta Corporation
Particulars
Operating activities
Capital expenditure
1991
1990
1989
$3,919.00 $7,000.00 $3,670.00
($6,031.00) ($4,600.00) ($3,650.00)
Gamma Corporation
Particulars
Operating activities
Capital expenditure
1)Purchase of plant, property and equipment
2)Purchase of Kienzle business
1991
1990
1989
$1,040,901.00 $1,434,074.00 $1,479,391.00
($970,809.00) ($1,027,625.00) ($1,223,038.00)
($737,548.00) ($1,027,625.00) ($1,223,038.00)
($233,261.00)
Yes, the firm was successful in generating enough cash for its CAPEX
PART I
Major Sources and Uses of Cash
1989
$46.80
($348.90)
($303.60)
($59.50)
$14.20
($26.00)
1989
$3,670.00
($3,650.00)
$20.00
In 1991, The
company borrowed.
Issuance of
Common Stock
(23082)
PART I
Major Sources and Uses of Cash
Alpha Corporation
ALPHA CORPORATION (All figures in $ millions)
Particulars
1991
1990
Current Assets
1)Accounts receivable
$160.80
$73.40
2)Inventory
$80.20
$100.90
3)Other current assets
$17.00
($1.20)
CA Total
$258.00
$173.10
Current Liabilities
1)Accounts payable
($91.30)
($21.30)
2)Others
$2.80
$14.10
CL Total
($88.50)
($7.20)
(CA-CL)
346.5
180.3
1989
($45.20)
($3.00)
($13.00)
($61.20)
$41.00
($10.50)
$30.50
($91.70)
Comment : For 1991 & 1990, the working capital account were primary sources of
cash whereas, for 1989 , it was users of cash
Beta Corporation
BETA CORPORATION (All figures in $ thousands)
Particulars
1991
1990
Current Assets
1)Accounts receivable
($10,837.00)
($613.00)
2)Inventory
($951.00)
($810.00)
3)Other current assets
($665.00)
$366.00
Total ($12,453.00)
($1,057.00)
Current Liabilities
1)Accounts payable
$5,657.00
($310.00)
Total $5,657.00
($310.00)
(CA-CL) ($18,110.00)
($1,367.00)
Comment: The working capital account were the Primary Users of Cash
1989
($1,550.00)
$1,043.00
($762.00)
($1,269.00)
$2,067.00
$2,067.00
($3,336.00)
Gamma Corporation
GAMMA CORPORATION (All figures in $ thousands)
Particulars
1991
1990
1989
Current Assets
1)Accounts receivable
$105,977.00
($241,357.00)
($373,248.00)
2)Inventory
$18,616.00
$99,743.00
($62,942.00)
3)Prepaid Expenses
($47,339.00)
($90,602.00)
$18,965.00
Total $77,354.00
($232,216.00)
($417,225.00)
Current Liabilities
1)Accounts payable
($17,694.00)
$107,001.00
$30,645.00
2)Customer advances
$92,222.00
$69,207.00
$105,847.00
3)Other liabilities
$1,263.00
$285,175.00
$26,576.00
4)Restructuring reserve
$593,160.00
$443,544.00
Total $668,951.00
$904,927.00
$163,068.00
(CA-CL) $746,305.00
($1,137,143.00) ($580,293.00)
Comment : Although, the recent account acted as the source of cash, the last two
years accounts acted as the users of cash
PART I
Major Sources and Uses of Cash
Alpha Corporation
Beta Corporation
Gamma Corporation
PART II
Trend In: Net Income, Cash Flow From Operations, Capital
Expenditures, Dividends, Net Borrowings, Working Capital Accounts
Alpha Corporation
Beta Corporation
Gamma Corporation
PART III
To Comment on the Quality of Earnings
Alpha Corporation
ALPHA CORPORATION (All figures in $ millions)
1991
1990
Net Income
($377.90)
($623.50)
Cash Flow from (continuing) operations
$120.30
$85.80
Capital Expenditures
($163.50)
($230.50)
Proceeds from disposable of assets
$157.00
$242.00
Proceeds from the sale of discontinued ops
$25.30
$407.30
Dividends
($7.20)
Net Borrowings (1+2+3)
(84.70)
(599.70)
Short Term Borrowings (1)
($2.60)
($222.60)
Proceeds from long term debt (2)
$44.40
$167.70
Payments of long term debt (3)
($126.50)
($544.80)
Working Capital Accounts
346.5
180.3
1989
($320.60)
$76.50
($348.90)
$94.10
($26.00)
353.10
$139.80
$305.00
($91.70)
($91.70)
Comment:
CFO is increasing, not able to meet CAPEX
Capex Decreasing, Company is selling assets too. Sale of assets is funding the payoff of
debt
Increase in WC is a good sign
PART II
Trend In: Net Income, Cash Flow From Operations, Capital
Expenditures, Dividends, Net Borrowings, Working Capital Accounts
Alpha Corporation
Beta Corporation
Gamma Corporation
PART III
To Comment on the Quality of Earnings
Beta Corporation
BETA CORPORATION (All figures in $ thousand)
1991
1990
1989
Net Income
$6,323.00
$5,201.00
$417.00
Cash Flow from (continuing) operations
$3,919.00
$7,000.00
$3,670.00
Capital Expenditures
($6,031.00) ($4,600.00) ($3,650.00)
Issuance of Common Stock
$23,082.00
$141.00
$639.00
Dividends
Net Borrowings (1+2+3+4)
($6,154.00) ($2,339.00) $2,876.00
Net Payments for WC line of credit (1)
($2,000.00) ($860.00)
Net payments equipment line of credit (2)
($985.00)
($126.00)
($388.00)
Principal Payments under capital lease (3)
($169.00)
($213.00)
($276.00)
Proceeds of subordinated debt (4)
($5,000.00)
$4,400.00
Working Capital Accounts
($18,110.00) ($1,367.00) ($3,336.00)
Comment:
Increasing Net Income is a good sign
CFO in latest year is less Not able to pay off its capex unlike previous years
Increasing CAPEX Positive about future, hence investing
Major funding from Common Stock which suggests that the company is increasing its
risk exposure by borrowing equity and paying off debt
PART II
Trend In: Net Income, Cash Flow From Operations, Capital
Expenditures, Dividends, Net Borrowings, Working Capital Accounts
Alpha Corporation
Beta Corporation
Gamma Corporation
PART III
To Comment on the Quality of Earnings
Gamma Corporation
GAMMA CORPORATION (All figures in $ thousand)
1991
1990
1989
Net Income
($617,427)
($74,393)
($1,072,610)
Cash Flow from (continuing) operations
$1,040,901.00 $1,434,074.00
$1,479,391.00
Capital Expenditures
($970,809.00) ($1,027,625.00) ($1,223,038.00)
Dividends
Net Borrowings (1+2)
(98177.00)
(3235.00)
(112820.00)
Proceeds from issunace of debt (1)
$14,249.00
$17,661.00
$40,425.00
Payments to retire debt (2)
($112,426.00)
($20,896.00)
($153,245.00)
Working Capital Accounts
$746,305.00 ($1,137,143.00) ($580,293.00)
Comment:
Company has paid off its account payables and current liabilities(WC increase) which
led to a decrease in CFO.
Pay off of net borrowings is funded by CFO
Despite having additional cash, it is not expanding its capex or investing enough
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