Week 4 DiscussionCOLLAPSE
Cash Flow Statement Analyis
This week we turn to the last of the major financial statements – the Cash Flow Statement.
Locate and post a screen shot of an actual Cash Flow Statement from the latest fiscal year for one of the following companies:
Medtronics
ExxonMobil
Your own Company (or any company you choose)
Pick a Cash Flow Statement line item or ratio from the following list:
Line ItemRatio
Net Change in Cash
Cash Flow from Operations
Cash Flow from Investing
Cash Flow from Financing
Capital Expenditures
Dividends Paid
Proceeds from Long Term Debt
Cash Flow Return on Assets
Dividend Payout Ratio
Cap Ex to Depreciation Ratio
Free Cash Flow
What does this line item or ratio measure and why is it important for Management to understand this number
From the Cash Flow Statement, identify the past 4 years of amounts for your line item or ratio. Share this data with the class using a data table or chart.
Answer the following questions:
What is the trend for this line item or ratio?
Has the line item or ratio amount increased or decreased?
Is this a “good” or a “bad” thing for this company?
What might management do to improve this line item or ratio?
Post your initial response by Wednesday, midnight of your time zone, and reply to at least 2 of your classmates’ initial posts by Sunday, midnight of your time zone.
First person to respond to is Gabriela
Greetings Prof. Armstrong & Classmates,
Medtronic – Ratio: Free Cash Flow (FCF)
I picked the Free Cash Flow ratio as it is new to my knowledge, and in comparison, with the net cash flow, the free cash flow is more specific, which shows how much cash a company generates through its operating activities, after taking into account operating expenses and capital expenditures. Investors use this metric to analyze the financial health of a company. The higher the free cash flow is, the healthier a company is. In contrast, an insufficient FCF can force companies to increase their debt levels and is a sign that companies cannot sustain earnings growth. (Investopedia, 1). It is the metric to analyze the investment that will generate a good return on capital.
In millions
2021
2020
2019
2018
Net Cash from Operating Activities
6,240
7,234
7,007
4,684
Additions to PPE
(1,355)
(1,213)
(1,134)
(1,068)
Free Cash Flow
4,885
6,021
5,873
3,616
As a trend Medtronic FCF has a steady growth compared with the industry, for example, Merck which is considered one of the leading players in the healthcare industry (2):
Merck
09-2021
2020
2019
2018
Free Cash Flow
4,787
5,569
9,967
8,307
These large amounts of FCF can be used to pay dividends, boost investments in operations or reduce debt, which Medtronic can dispose of. The level of revenues is relatively steady; however, the debt levels went up by 20% in 2021; the FCF accumulated could be used to pay this debt partially. As well, the levels of inventory and accounts receivables are high, and it costs cash, so these could generate the cash that could increase the FCF levels.
Thank you. Gabriela
References:
Investopedia. Retrieved from: https://www.investopedia.com
Merck. Retrieved from: https://www.macrotrends.net/stocks/charts/MRK/merck/free-cash-flow
2nd response to is Phi
Greetings Prof. Armstrong & Classmates,
Medtronic – Ratio: Free Cash Flow (FCF)
I picked the Free Cash Flow ratio as it is new to my knowledge, and in comparison, with the net cash flow, the free cash flow is more specific, which shows how much cash a company generates through its operating activities, after taking into account operating expenses and capital expenditures. Investors use this metric to analyze the financial health of a company. The higher the free cash flow is, the healthier a company is. In contrast, an insufficient FCF can force companies to increase their debt levels and is a sign that companies cannot sustain earnings growth. (Investopedia, 1). It is the metric to analyze the investment that will generate a good return on capital.
In millions
2021
2020
2019
2018
Net Cash from Operating Activities
6,240
7,234
7,007
4,684
Additions to PPE
(1,355)
(1,213)
(1,134)
(1,068)
Free Cash Flow
4,885
6,021
5,873
3,616
As a trend Medtronic FCF has a steady growth compared with the industry, for example, Merck which is considered one of the leading players in the healthcare industry (2):
Merck
09-2021
2020
2019
2018
Free Cash Flow
4,787
5,569
9,967
8,307
These large amounts of FCF can be used to pay dividends, boost investments in operations or reduce debt, which Medtronic can dispose of. The level of revenues is relatively steady; however, the debt levels went up by 20% in 2021; the FCF accumulated could be used to pay this debt partially. As well, the levels of inventory and accounts receivables are high, and it costs cash, so these could generate the cash that could increase the FCF levels.
Thank you. Gabriela
References:
Investopedia. Retrieved from: https://www.investopedia.com
Merck. Retrieved from: https://www.macrotrends.net/stocks/charts/MRK/merck/free-cash-flow
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Discussion in Week 4 COLLAPSE
Analyze the Cash Flow Statement
This week, we’ll look at the Cash Flow Statement, the last of the major financial statements.
Find and submit a screen photo of a real Cash Flow Statement from one of the following companies from the most recent fiscal year:
Medtronics
ExxonMobil
Owning a Business (or any company you choose)
Choose one of the following line items or ratios from the Cash Flow Statement:
Line ItemRatio is a ratio of the number of items in a line.
Cash Flow Change
Flow of Cash from Operations
Investing Cash Flow is a term that is used to describe the amount of money that is
Cash Flow from Financing (Cash Flow from Financing)
Expenditures on capital goods
Dividends received
Long-Term Debt Repayments
Return on Assets (Cash Flow)
Ratio of Dividends Paid Out
Ratio of Capital Expenditure to Depreciation
Flow of Cash
What does this line item or ratio represent, and why does it matter?
Discussion in Week 4 COLLAPSE
Analyze the Cash Flow Statement
This week, we’ll look at the Cash Flow Statement, the last of the major financial statements.
Find and submit a screen photo of a real Cash Flow Statement from one of the following companies from the most recent fiscal year:
Medtronics
ExxonMobil
Owning a Business (or any company you choose)
Choose one of the following line items or ratios from the Cash Flow Statement:
Line ItemRatio is a ratio of the number of items in a line.
Cash Flow Change
Flow of Cash from Operations
Investing Cash Flow is a term that is used to describe the amount of money that is
Cash Flow from Financing (Cash Flow from Financing)
Expenditures on capital goods
Dividends received
Long-Term Debt Repayments
Return on Assets (Cash Flow)
Ratio of Dividends Paid Out
Ratio of Capital Expenditure to Depreciation
Flow of Cash
What does this line item or ratio represent, and why does it matter?
