logo

(Solved) Cash Flow Statement - PDF

   

Added on  2021-06-14

5 Pages2207 Words96 Views
ASSESSMENT TASKWesfarmers being a public limited company recognized in Australian Stock Exchange is selectedand a detailed analysis is being conducted for the year ended 30th June, 2017.Wesfarmers is one of the largest public limited Australian based company engaged in diversifiedbusiness activities and operations. It has a huge shareholder base and aims at increasingstakeholders returns both in monetary and non- monetary aspects. CASH FLOW STATEMENTI.Cash Flow is a statement prepared by the enterprises to calculate and observe themovement of the cash and cash equivalent within the organization. It divides the cashexpenditure and receipts in three categories named as Net Cash Inflow / Outflow fromOperating Activities, Investing Activities and Financing Activities. The primary objectiveof preparing the cash flow statements by the enterprises is to check out the movement ofthe cash inflow and outflow in depth and in a detailed way and the closing balance of thecash with the enterprise at the end of the year to meet its working capital requirements.The operating activities is concerned with the regular operations of the business of theenterprise i.e.- the primary activities carried out by the enterprise to run its business. Thisactivity includes receipts from customers and debtors of the enterprise, payments toSuppliers and creditors and other regular business expenses incurred to carry on its day today activities and excludes non-cash items viz depreciation. The positive cash flow fromthis activity signifies a stable cash position of the enterprise. Thus the cash flow from theoperating activities gives a proper vision of cash flow to the enterprise relating to itsprimary business carried out by the enterprise.In context of the Wesfarmers cash flow statement, operating activity specifically includesinterest and dividends received and taxes paid and borrowings were deducted to arrive atthe cash flow from operating activities which is $4226m positive and higher than theprevious year cash flow. The reason being the increase in receipts and mere decrease intaxes paid and lower borrowing cost [CITATION Wes171 \l 1033 ]Secondly, the investing activity deals with the cash invested in the business in the form ofboth fixed and movable assets, investment in other body corporates or shares ordebentures or any property plant and equipment. Investments include both short term andlong term investments. Intangible assets are also considered under the Investmentactivity. Similar to purchases of assets and investments, sale of assets and investmentsduring the year is also considered under this activity to arrive at the net cash flow fromthe Investing activities. Hence, this activity gives a clear vision of the assets andinvestments acquired and sold by the enterprise during the year and its current holding atthe end of the year. The cash flow from the Investing activities of the company selectedshows a net cash outflow of Rs $53m which is far better as compared to last year. Themajor reason being a substantial sale of associate by the enterprise and redemption ofloan notes.
(Solved) Cash Flow Statement - PDF_1
Lastly, comes the Financing activities which includes the cash movement relating tofinance viz issue and redemption of shares and debentures, interest and dividend receivedand paid, borrowings in the form of both short and long term acquired and repaid duringthe year. Thus, financing activities gives a clear cut vision of the sources of cash inflowand outflow to the enterprise and its cost of capital. The financing activities of thewesfarmers indictaes a negative cash flow amounting to Rs $3771m which is worse ascompared to last year due to a substantial decrease in “proceeds from borrowings”.Thus, after considering all the activities under cash flow statement the firm is left with aclosing cash balance of Rs $1013m [CITATION Wes15 \l 1033 ]II.While making a comparitive analysis of the cash flow statements of Wesfarmers of thethree financial years, it has been observed that the receipts from its customers isincreasing at an average of five percent every year whereas the operating cash flow hasdecreased in the year 2016 as comapred to 2015 by approximately eleven percent andthen a subsequent increase in the cash flow in 2017 by twenty five percent as comparedto 2016. The major reason of such fluctuations are an uneven increase and decrease ininterest income and dividend income received by the enterprise and its correspondingeffects in taxes paid by the enterprise.Similarly, in case of investment activity it had been observed that the major increase anddecrease in cash flows in all the three years is due to an uneven sale and acquistion ofassociates and subsidiaries by the enterprise along with acquisition and redemption ofloan notes in an unstructured manner [CITATION Wes15 \l 1033 ]Lastly, financing activities reflects a different scenario of cash movement within theorganization. All the items under this activity which includes repayment and proceedsfrom borrowings payment of capital return and equity dividends are having an scatteredpattern of receipts and payments which ultimately resulting in an unequal movement ofcash flows within the organization under financing activities.However, taking an overall view of all the activities together , the firm is under aprogressive status of improvement as compared to last three years i.e.- 2015,2016 and2017 [CITATION Wes171 \l 1033 ]OTHER COMPREHENSIVE INCOME STATEMENTIII.Comprehensive Income statement is prepared to bypass the Income statement and includeitems that had not been actually realized and is said to be notional income or losses. Inother words, comprehensive income is said to be the statement prepared to recognize allincomes and losses of the enterprise for a specified period. However, the comprehensiveincome statement of the Wesfarmers includes Exchange difference on account of foreignoperations, unrealized losses on account of hedge of cash flows , the tax effect ,losses/gains of defined benefit plans and share of associates and joint venture reserves.IV.The exchange difference on account of translation of foreign operations recorded in thecomprehensive income statement arises due to transaction with the business partners ofother countries. The exchange difference thus occurs on account of change in rates ofcurrency exchange at the time of billing or payment or receipt of consideration againstthe services performed or goods delivered. For instance a vendor in India billed his
(Solved) Cash Flow Statement - PDF_2

End of preview

Want to access all the pages? Upload your documents or become a member.

Related Documents
Analysis of Wesfarmers' Cash Flow Statement, Comprehensive Income Statement and Corporate Income Tax
|4
|2216
|64

Cash Flow Analysis of Medical Supplies Pty Ltd, Advertising Company Ltd, and Wesfarmers
|7
|676
|276

Comprehensive Income 7 Items Included in Other Comprehensive Income 7 Understanding of Items shown under Comprehensive Income 7
|13
|2813
|495

Analysis of Cash Flows, Other Comprehensive Income Statement and Corporate Income Tax of Ausdrill Limited
|10
|2234
|117

Understanding Cash Flow Statement and its Activities
|5
|750
|264

Preparation of Cash Flow Statement
|8
|1198
|440