WEEK 4 DISCUSSION 2 OMM622

Tasha’s Discussion

Analyzing the Statement of Cash Flows

Using the table below, explain the difference between net income and cash flow from operating activities for Techno in 2009 and analyze their cash flows for 2008 and 2009.

(in thousands)	2009	2008
Net income	$ 316,354	$  242,329
Noncash charges (credits) to income
Depreciation and amortization	68,156	62,591
Deferred taxes	15,394	22,814
	$ 399,904	$  327,734
Cash Provided (Used) by Operating Assets and Liabilities:
Receivables	(288,174)	(49,704)
Inventories	(159,419)	(145,554)
Other current assets	(1,470)	3,832
Accounts payable, accrued liabilities	73,684	41,079
Total Cash Provided by Operations	$ 24,525	$  177,387
Investment activities
Additions to plant and equipment	(94,1760)	(93,136)
Other investment activities	14,408	(34,771)
Net investment activities	($ 79,768)	($ 127,907)
Financing activities
Purchases of treasury stock	(45,854)	(39,267)
Dividends paid	(49,290)	(22,523)
Net changes in short-term borrowing	125,248	45,067
Additions to long-term borrowings	135,249	4,610
Repayments of long-term borrowings		(250,564)
Net financing activities	$  165,353	($ 262,677)
Increase (decrease) in cash	$  110,110	($ 213,197)
Beginning cash balance	78,114	291,311
Ending cash balance	$  188,224	$    78,114

Respond to at least two of your classmates’ posts.

   

WEEKLY REFERENCES: Required Resources

Text

Epstein, L. (2014). Financial decision making: An introduction to financial reports  [Electronic version]. Retrieved from https://content.ashford.edu/

· Chapter 4: Elements of a Statement of Cash Flows

Article

Ford Motor Company. (2014). Ford Motor Company 2012 annual report (Links to an external site.)Links to an external site.. Retrieved from http://corporate.ford.com/content/dam/corporate/en/investors/reports-and-filings/Annual%20Reports/2012-annual-report.pdf

 

Recommended Resources

Article

Heakal, R. (2010, May). What is a cash flow statement? (Links to an external site.)Links to an external site. Forbes. Retrieved from http://www.forbes.com/2010/05/27/cash-flow-statement-personal-finance-securities-analysis.html

Website

AccountingCoach. (2014). Cash flow statement (explanation) (Links to an external site.)Links to an external site.. Retrieved from http://www.accountingcoach.com/cash-flow-statement/explanation/1

· Read Parts 1 through 8

Reply to Edward Smith

Techno’s net income was 316,354 for 2009 which was accumulated after subtracting the depreciation and amortization and deferred taxes were deducted. The company’s cash flow for that same year was 24,525 after the net income of 399,904 (before deductions) was deducted from the total of their receivables, inventories and other current assets minus the accounts payables/accrued liabilities which is why the cash flow from operating activities are lower than the net income. Net income is also different from operating cash because it includes more deductions that are not considered income. Besides the net income, cash provided by operating assets and liabilities only has the accounts payable deductions.

In 2009, Techno had more than a 100,000 higher ending cash balance than in 2008 as a result of having higher receivables and inventories. “Some companies pay out a portion of their profits in cash to their shareholders. Dividends received from the company's investments (such as stock owned in another company) are shown in the operating activities section of the statement of cash flows” (Epstein, 2014, p. 4.4). In comparison to 2008, Techno purchased an extra 6,000 in stock and paid more than twice as much dividends to shareholders.

References

Epstein, L. (2014). Financial decision making: An introduction to financial reports. Retrieved from https://content.ashford.edu/books/AUOMM622.14.1/sections/sec1.3?search=equity#w10704 (Links to an external site.)