FIN4060 Final Project

Statement of Cash Flows

Introduction 

The week 3 project paper will analyze the statement of cash flows for the chosen two companies of which are CISCO and Dell Inc. the paper will also provide a summary of the course project of up to this point shining light on what I have learned about the two companies. The next task will be researching the companies investing as well as financing activities and then compare and contrast them regarding the types of goods and services they offer. Finally, the paper will evaluate both the investing as well as the financing strategies of both companies and define its effectiveness.  

Course project summary

The course project involved the selection of two companies that are publicly traded and examine their financial statements, their characteristics of operations and obligations to corporate governance. Both the selected companies are tech giants in the United States offering a range of tech goods and services such as computers, software, hardware servers, smartphones among other products and services. Both companies are well committed to corporate governance and this is through the adoption of guidelines that are intended to promote a high level of performance as well as the provision of guidance of the affairs of the organizations. Also, the course project identified and analyzed the various financial statements including the income statements as well as the balance sheets. According to the financial statements analyzed for the year 2019, Dell Inc. appeared to have done better than CISCO with a revenue of $90.63 billion as compared to that of CISCO which was at $51.9 billion (DELL Technologies, 2020). The success of Dell Inc. was mostly attributed to better managerial operations as well as investments.

Investing Activities and Strategy

After researching the investing activities as well as strategies of both companies, it was clear that their investment activities were related to capital expenditures. Through capital expenditures, the companies were able to invest back in the businesses through the acquisitions of assets as well as maintaining assets. Some of the capital expenditures of each company were included in the balance sheet. In the first quarter of 2019, CISCO spent $189 million on capital expenditure while making several investments that raised over $150 million according to the CISCO 2019 annual report (CISCO, 2019). On the other hand, Dell Inc. had a capital expenditure of $ 537 million in the last quarter of the financial year 2019 (DELL Technologies, 2020). Dell also had several investments in 2019 raising a profit of over $ 200 million in the last financial year (DELL Technologies, 2020).

Both companies made several investments in terms of acquisitions and mergers in the previous financial years. All these investments made the companies a huge profit in each respective financial year as they both applied customer-driven strategies in expanding their customer base. The difference that exists between the two companies is the number of capital expenditures that the businesses are investing back in. CISCO is one of the fastest-growing tech companies globally, however, when compared to Dell which is already an established tech giant, it is not doing as better as Dell. Thus, the profits of Dell Inc. are much higher than those of CISCO both quarterly and annually. In my opinion, CISCO investment activities and strategies are not as profitable as those of Dell Inc.

Financing Activities and Strategies

The biggest financing activities and strategies of both companies involved the dividends mostly paid to the various stockholders as well as the net borrowings that the companies utilize to finance the business. Dell paid a total of $11 billion on dividends to its shareholders in the 2019 financial year with a net borrowing of $14.4 billion at the end of the third quarter of the 2019 financial year (DELL Technologies, 2020). On the other hand, the major financial activities for CISCO the payment of a debt of $6.98 billion to its shareholders (CISCO, 2019). The company also had a net borrowing of $5.5 billion at the end of the third quarter of the 2019 financial year (CISCO, 2019). Both companies were able to pay off their dividends and also debts through the various investments they had made and also offering quality goods and services to customers to stay at the top.

 The companies shared investments as their major financial activities of 2019. The ratio of debt to equity for both companies was manageable leading to the businesses making profits at the end of the year. The differences in the financial activities and strategies for both companies are evident in their investments whereby Dell invested heavily when compared to CISCO (CISCO, 2019). Dell is investing in other companies developing the same products through partnership to be at the forefront of future technologies. Although the two companies are very competitive, CISCO seems like it’s not putting extra effort towards maximizing their profits as compared to Dell Inc. 

Conclusion

This paper thoroughly examined and analyzed both the investing activities and financing activities for Dell and CISCO companies. The analysis showed that the biggest activities in terms of investments included capital expenditures as well as investments. However, Dell invested more heavily than CISCO and as a result, made more revenue when compared to CISCO. The financing activities for both companies involved the dividends paid to the shareholders and the net debt or borrowing made by the businesses. Generally, Dell fared well in terms of debt to equity ratio as compared to CISCO which had a lower ratio of debt to equity.

References

CISCO. (2019). 2019 Annual Report; Defining the Future of internet. CISCO. Retrieved from https://www.cisco.com/c/dam/en_us/about/annual-report/cisco-annual-report-2019.

DELL Technologies. (2020). Dell Technologies Reports Fiscal Year 2020 Fourth Quarter and Full Year Financial Results. PRNewswire. Retrieved from https://www.prnewswire.com/news-releases/dell-technologies-reports-fiscal-year-2020-fourth-quarter-and-full-year-financial-results-301012817.html