Cash Flow Analysis Solution Strictly Confidential

Table of Contents
#VALUE!

Notes
This Excel model is for educational purposes only and should not be used for any other reason.
All content is Copyright material of CFI Education Inc.
https://corporatefinanceinstitute.com/

© 2019 CFI Education Inc.

All rights reserved.  The contents of this publication, including but not limited to all written material, content layout, images, formulas, and code, are protected under international copyright and trademark laws.  
No part of this publication may be modified, manipulated, reproduced, distributed, or transmitted in any form by any means, including photocopying, recording, or other electronic or mechanical methods,
© Corporate Finance Institute. All rights reserved. 
Cash Flow Analysis Solution Year 1 Year 2 Year 3

Statements of Cash Flows

BPS Millions
Operating activities
Net income 1,576 1,899 2,130
Depreciation and amortization 838 878 992
Net change in operating working capital 181 11 194
Other operating cash flow adjustments 24 (177) 27
Operating cash flow 2,619 2,611 3,343

Investing activities
Capital asset acquisitions (2,561) (2,852) (3,442)
Capital asset disposals 664 809 1,056
Net capital asset acquisitions (1,897) (2,043) (2,386)
Other investing cash flows (65) (300) (568)
Investing cash flow (1,962) (2,343) (2,954)

Financing activities
Increase in debt - 4,743 9,333
Decrease in debt (109) (4,559) (7,593)
Other debt movements (6) 84 87
Increase in equity 123 156 154
Decrease in equity (59) (490) (775)
Other equity movements (441) (467) (794)
Other financing cash flows 14 (18) (55)
Financing cash flow (478) (551) 357

Change in cash 179 (283) 746

Cash at beginning of year 1,146 1,325 1,042
Cash at end of year 1,325 1,042 1,788

Cash Flow Analysis

Question 1
During Year 5 where did the company receive most of its funding from (ie, operating, investing or financing activities)?
the implications of where the funding came from and what was done with it?

Tesco received most of its funding from operating activities. We can see that it was primarily net income driven
that Tesco had a profitable year. The implications of funding from operating activities are that the company is a
invest in assets to maintain and grow the company. Tesco is also able to repay outstanding debt, as well as buy
of its shares. The significance of these activities is that Tesco can strengthen its balance sheet through investin
assets and maintaining lower leverage. The company increases its solvency.
 
Question 2
When looking at the Year 5 financing section of Tesco’s cash flow were the most significant movements in debt or equi
Tesco received most of its funding from operating activities. We can see that it was primarily net income driven
that Tesco had a profitable year. The implications of funding from operating activities are that the company is a
invest in assets to maintain and grow the company. Tesco is also able to repay outstanding debt, as well as buy
of its shares. The significance of these activities is that Tesco can strengthen its balance sheet through investin
assets and maintaining lower leverage. The company increases its solvency.
 
Question 2
When looking at the Year 5 financing section of Tesco’s cash flow were the most significant movements in debt or equi
you think this occurred?

The most significant movements occurred within debt. During Year 5 Tesco repaid a significant portion of its de
it bought back very little of its equity. The company was able to do this due to the strong results in operations w
significant portion of the funding of the business occurred. Although it did invest a significant portion in capita
can see that in Year 4 there was a substantial investment and therefore it seems reasonable that there wouldn’
much except for some moderate growth and maintenance activities. We also see that Tesco borrowed a signifi
amount in Year 4, and has therefore repaid a good portion in Year 5.
Tesco still has a fairly high cash balance at the end of Year 5. It will be interesting to see whether the company
stockpiling cash for a specific strategy or to cover an impending contingency.
 Year 4 Year 5

2,138 2,336
1,189 1,384
14 (131)
619 1,156
3,960 4,745

(4,487) (2,855)
994 1,820
(3,493) (1,035)
(2,481) (842)
(5,974) (1,877)

7,387 862
(2,733) (3,601)
(18) (41)
130 167
(265) (24)
- -
(766) (921)
3,735 (3,558)

1,721 (690)
1,788 3,509
3,509 2,819

ting or financing activities)? What are

rimarily net income driven, indicating

s are that the company is able to
anding debt, as well as buy back some
nce sheet through investing in more

movements in debt or equity? Why do

 rimarily net income driven, indicating
s are that the company is able to
anding debt, as well as buy back some
nce sheet through investing in more

movements in debt or equity? Why do

significant portion of its debt whereas

ong results in operations where a
gnificant portion in capital assets, we
onable that there wouldn’t be as
t Tesco borrowed a significant

ee whether the company is