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Cashflow Statement Analysis

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Cashflow Statement Analysis

Now give it

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lordvoldemort917
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© © All Rights Reserved
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Cashflow Statement Analysis

I. TechInnovate Inc.

Background
TechInnovate Inc. is a rapidly growing technology company specializing in artificial
intelligence and machine learning solutions. The company has been in operation for 5
years and has seen significant growth in the past two years. However, despite reporting
increasing revenues and net income, TechInnovate is experiencing cash flow issues.

You are tasked with analyzing TechInnovate's cash flow statement for the year ended
December 31, 2023, along with supplementary information provided.

Cash Flow Statement (in millions of dollars)

Cash flows from Operating Activities:


Net Income $150
Adjustments to reconcile net income to net cash:
Depreciation and Amortization $40
Stock-based Compensation $25
Deferred Income Taxes ($15)
Changes in operating assets and liabilities:
Accounts Receivable ($80)
Inventory ($30)
Accounts Payable $35
Accrued Expenses $20
Net cash provided by operating activities $145

Cash flows from Investing Activities:


Capital Expenditures ($200)
Acquisition of Subsidiary ($150)
Purchases of Short-term Investments ($100)
Sales of Short-term Investments $80
Net cash used in investing activities ($370)

Cash flows from Financing Activities:


Proceeds from Issuance of Long-term Debt $300
Repayments of Long-term Debt ($50)
Dividends Paid ($30)
Repurchases of Common Stock ($80)
Net cash provided by financing activities $140

Net decrease in cash and cash equivalents ($85)


Cash and cash equivalents at beginning of year $200
Cash and cash equivalents at end of year $115

▪ Revenue for the year was $800 million, up 25% from the previous year.
▪ Gross profit margin decreased from 60% to 55% due to increased production costs.
▪ The company acquired a small AI startup for $150 million, financed partly through
the issuance of new debt.
▪ TechInnovate's credit rating was downgraded from A to BBB+ during the year.
▪ The company initiated a share repurchase program to boost investor confidence.
▪ TechInnovate introduced a new product line, which required significant upfront
investment in R&D and inventory.
▪ The company's average collection period increased from 45 days to 60 days.
▪ Interest expense for the year was $25 million.

i. Compute the free cash flow for the year.


ii. Analyse each of the sections and the overall cash position.
II. Altex Manufacturing Ltd.

Background:

Altex Manufacturing Ltd. is a mid-sized manufacturing company based in India. The


company specializes in producing components for the automotive industry. Altex has been in
operation for over 15 years and has established itself as a reliable supplier for several well-
known automobile companies.

In recent years, the company has experienced fluctuating cash flows due to changing market
conditions, rising input costs, and competition. Altex is now looking to raise additional capital
to expand operations and diversify its product lines.

The following cash flow statement of Altex Manufacturing Ltd. is for the fiscal year ending
March 31, 2024. Your task is to analyze the statement.

Cash Flow Statement of Altex Manufacturing Ltd.


(For the year ended March 31, 2024) (₹ in millions)

A. Cash Flow from Operating Activities:


- Net Profit before tax: ₹ 500
- Adjustments for:
- Depreciation: ₹ 120
- Interest Expense: ₹ 80
- Interest Income: ₹ (15)
- Loss on Sale of Fixed Assets: ₹ 40
- Increase in Provisions: ₹ 60
- Operating Profit before Working Capital Changes: ₹ 785
- Changes in Working Capital:
- Decrease in Inventory: ₹ 70
- Increase in Trade Receivables: ₹ (90)
- Decrease in Trade Payables: ₹ (50)
- Cash generated from Operations: ₹ 715
- Direct Taxes Paid: ₹ (150)
- Net Cash from Operating Activities (A): ₹ 565

B. Cash Flow from Investing Activities:


- Purchase of Fixed Assets: ₹ (300)
- Proceeds from Sale of Fixed Assets: ₹ 60
- Investment in Joint Ventures: ₹ (100)
- Interest Received: ₹ 15
- Net Cash used in Investing Activities (B): ₹ (325)

C. Cash Flow from Financing Activities:


- Proceeds from Issue of Shares: ₹ 200
- Proceeds from Long-term Borrowings: ₹ 500
- Repayment of Long-term Borrowings: ₹ (150)
- Interest Paid: ₹ (80)
- Dividend Paid: ₹ (100)
- Net Cash from Financing Activities (C): ₹ 370

D. Net Increase in Cash and Cash Equivalents (A+B+C): ₹610

E. Cash and Cash Equivalents at the beginning of the year: ₹90

F. Cash and Cash Equivalents at the end of the year (D+E): ₹700

i. Compute the free cash flow for the year.


ii. Analyse each of the sections and the overall cash position.
III. YARD Co.

Company Background
YARD is a large-scale retail chain operating in India. The company has a diverse product
range, including apparel, electronics, and home goods. Despite consistent revenue growth,
the company has been experiencing cash flow challenges, leading to concerns about its
financial stability.

Financial Data
The following is a simplified cash flow statement for the company for the fiscal year ending
March 31, 2024:

Cashflow Statement for the year ended March 31, 2024


Particulars ₹ in million
Operating Activities
Net Income 100
Adjustments to net income 20
Net cash provided by operating activities 120

Investing Activities
Purchase of property, plant, and equipment (50)
Purchase of investments (10)
Net cash used in investing activities (60)

Financing Activities
Proceeds from issuance of long-term debt 30
Payment of dividends (20)
Net cash provided by financing activities 10

Net increase in cash and cash equivalents 70


Cash and cash equivalents at beginning of year 50
Cash and cash equivalents at end of year 120

i. Compute the free cash flow for the year.


ii. Analyse each of the sections and the overall cash position.

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