The Assignment

1902 Words May 8th, 2014 8 Pages
Submitted by: Nicole Monsanto 1. What were the firm’s major sources of cash? Its major uses of cash?
Answers are in BOLD letters Exhibit 1 : Alpha Corporation | YEAR | 1991 | 1990 | 1989 | Source of Cash:Accounts Receivable | 160.8 | 73.4 | (45.2) | Uses of Cash:Payments of Long Term Debt | (126.5) | (544.8) | (91.7) | Exhibit 2 : Beta Corporation | YEAR | 1991 | 1990 | 1989 | Source of Cash:Cash received from customers | 83,865 | 73,273 | 51,110 | Uses of Cash:Cash paid to suppliers/employees | (77,820) | (65,480) | (46,589) | Exhibit 3 : Gamma Corporation | YEAR | 1991 | 1990 | 1989 | Source of Cash:Issuance of treasury shares, incl tax benefits | 239,653 | 296,225 | 230,733 | Uses of Cash:Purchase of PPE |
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However, overall performance shows a steady trend and cash inflows are stable and good. |

3. Was the firm able to generate enough cash from operations to pay for all of its capital expenditures?

Exhibit 1: Alpha Corporation
During the first two years (1989/1990), this company’s net cash was not able to cover its capital expenditures. You can see it through their investing activities, as it is seen that the figure is greater than that of its net cash (provided by operating activities). However, during 1991 they were able to turn it around and thus they were able to pay this obligation.

Exhibit 2: Beta Corporation
In all 3 years, the company shows a negative cash flow from its investing activities (where the capital expenditures fall into), which indicates a cash outflow. Their cash from operations shows that it cannot accommodate to pay all of its capital expenditures due to the values shown in their net cash used in investing activities comparing to their net cash generated by operating activities.

Exhibit 3: Gamma Corporation
This company shows a strong cash inflow from year 1 to 2. However, because of their investment in year 3, you will see a negative cash outflow by 1991. Nonetheless, overall the company’s cash from operation can pay for its capital expenditures.

4. Did the cash flow from operations cover both the capital expenditures and the firm’s dividend payments, if any?

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