Alpha Corporation

S.No
1

Items

1991

1990

1989

160.8
80.2
168.4
135.5

73.4
100.9
220.1
384.1

(45.2
)
(3.0)
263.4
125.3

91.3
377.9

21.3
623.5

Proceed from disposal of

depreciable and other assets
Proceed from the sale of
discontinued operations

157.0
25.3

242.0
407.3

94.1
-

Major Uses

(129.7)
(27.8)

(174.4)
(43.1)

(303.
6)
(59.5
)

44.4
(2.6)

167.7
(222.6)

305.0
139.8

Operation
Major sources of cash
Account Receivables
Inventory
Depreciation
Restructuring
Major Uses
Account payable and liabilities
Loss from continuing operation

41.0
320.6

Investment
Major sources

Investment in depreciable assets

Investment in capitalized software

Financing
Major sources
Proceed from long term debt
Increase in short term borrowings
Major Uses

Payment of long term debt

(126.5)

(544.8)

(91.7
)

Whether CFO > profit

Yes

Yes

Yes

Whether Excess CFO invested

No

No

NO

Whether CFO or CFI used for

financing

No

No

NO

TRENDS
Net income

Loss decrease
by 39.3%

Loss
increase
by 94.4%

Loss

Cash flow from (Continuing )

operations /

Increase by
40%

+ve
Increase
by 90.8%
yes

Capital expenditures

Decrease

Decrease

Dividends

No dividend

Decrease
by 72.30%

Net borrowings

Decrease

Increase

Working capital accounts

Increase

yes

Yes

OVERALL ASSESSMENT :
As we can see from the statement
of cash flows, the net income is
increasing every year. Also, the
cash flow from operating activities
is increasing. The capital
expenditure of the company is
decreasing. Also, the working
capital of the company is
increasing. Though the net
borrowing of the company has
increased, since net cash flow has

yes
Decrease

increased the overall picture of the

company seems to be healthy.

Beta Corporation

S.No
1

Items
Operation

1991

1990

1989

83,865
643

73,273
355

51,110
132

536
2233
77,820

1046
102
65,480

908
75
46,589

(6,031)
(8000)

(4,600)
-

(3,650)
-

Major sources of cash

Cash received from customers
Interest Received
Major Uses
Interest paid
Income tax paid
Cash paid to supplier & Employees

Investment
Major sources

Major Uses
Capital Expenditures
Marketable Securities Purchases

Financing

Major sources
Issuance of common stock

23,082

141

639

Net payment under working capital

line of credit
Net payment under equipment line
of credit
Principle payments under capital
lease obligations

985
169

2000
126
213

860
388
276

Whether CFO > profit

No

Yes

Yes

Whether Excess CFO invested

NO

yes

yes

Whether CFO or CFI used for

financing

No

Yes

No

Trends
Net income

Increase by
21.57%

Increase
by 1147%

Profit

Cash flow from (Continuing )

operations /

Decrease by
44%

Increase
by 90.73%

Positive

Increase
by 26.02%

Yes

Capital expenditures

Increase by
31.1%
No Dividend

No
Dividend

No

Major Uses

Dividends
Increase
Net borrowings

Yes
Decrease

Increase
Working capital accounts

Overall assessment

+ve
Increase

The net income of the business is

increasing. The cash flow from
operating expenses is showing a
decrease in comparison to the
previous year. However, the cash
received from customers is showing
a consistent increase. The decrease
in cash flow from operations can be
mainly attributed to higher income
tax and cash paid to suppliers and
employees. The capital
expenditures of the company is also
increasing. This shows that the
company is investing heavily in
fixed assets. The working capital of
the company is showing an
increasing trend. This is a healthy
sign as the excess cash with a
company would increase as the
working capital increases. Thus
based on the statement of cash
flows, the outlook of the company
seems healthy.

GAMMA CORPORATION

S.No
1

Items
Operation

1991

1990

1989

105,977
18,616
828,560
189,077
92,222
593,160

(241,357)
99,743
796,201
92,329
69,207
443,544

(45.2)
(3.0)
263.4
125.3
105,847
-

Major sources of cash

Account Receivables
Inventory
Depreciation
Other adjustment to income
Deferred revenue
Restructuring reserves

liabilities

1,263

285,175

26,576

(17,694)
(47,239)
(105,614)

107,001
(90,602)
(201,560)

30,645
18,965
(75,502)

737,548

1,027,625

1,223,0
38

233,261

Major Uses
Account payable
Prepaid expenses
Taxes

Investment
Major sources

Major Uses
Purchase of plant, property, and
equipment
Purchase of Kienzle business

Financing

Major sources
Proceed from issuance of debt
Issuance of treasury shares,

14,249
239,653

17,661
296,225

40,425
230,733

(112,426)
(240,719)

(20,896)
(270,231)

(153,24
5)
(814,95
8)

Major Uses
Payment of debt
Purchase of treasury shares

Whether CFO > profit

Yes

Yes

Yes

Whether Excess CFO invested

Yes

Yes

Yes

Whether CFO or CFI used for

financing

Yes

Yes

Yes

Trends
Net income

Decrease
by 729%

Decrease by
93%

Profit

Cash flow from (Continuing )

operations /

Decrease
by 27.4%

Decrease by
3%

+ve

Capital expenditures

Decrease
by 6.93%

Dividends

No
Dividend

No Dividend

Net borrowings

Increase

Decrease

-ve
Decrease by
14.53%
No
dividend
Increase
-ve

Working capital accounts

9

Overall assessment
As we can see from the statement
of cash flows, the net income is
decreasing every year. Also, the
cash flow from operating activities
is decreasing. This is a major
cause of concern. The capital
expenditure of the company is also
increasing and this is mainly
funded by borrowings.( net
borrowing is increasing). Also, the
working capital of the company is
decreasing. This means that the
company is going through a
negative cycle as most of the
indicators have a negative trend.
Hence, the company needs to take
stock of things and must have a

Decrease

Decrease

clear plan in future.

Framework 2
Alpha Corporation is going to declare the bankruptcy because it is
only one which is using debt to fund its growth. Although it is
generating enough cash flow but that cash flow are being used to
service debt thus company is using debt to pay interest and other
expenses. Talking about the beta we can say company is showing the
health growth with good cash flows and investment done by it in
fixed assets as fixed assets are the one which is going to generate
future profits. On the other hand Gamma Corporation is showing a
negative trend in the year 1991 although it has generated a positive
cash flow and invested in new business which shows that company is
investing heavily but the company has gone for ipo for raising money
and it is being used to but assets which is a health sign.