Corporate Accounting: Role and Issues of Cash Flow Statements for BHP, Santos, and Funtastic Limited

This presentation analyzes the role and issues of cash flow statements for BHP, Santos, and Funtastic Limited. It covers income statements, cash flow statements, importance for investors, examination of cash flow for each company, comparison of cash flow and net profit, and more.

Title
CORPORATE ACCOUNTING

INTRODUCTION
In the field of finance, there are a range of accounting approaches and
corporate accounting is one of them. It can be characterized as a form
of accounting which is associated with process of preparing final
accounts including cash flows, income statement etc. The PPT is based
on analyzing role and issues of cash flow statements for three separate
companies named as BHP limited, Santos limited and Funtastic
limited.

PART A (Review of information of
income statement and cash flow)
Income statement- It can be understood as a form of statement which includes information about
income and expenses during a particular time period (Güleç and Bektaş, 2019). This statement
includes such information:
 Sales revenue
 Cost of sales
 Operating income and expenses
 Interest expenses
 Tax-
 Net profit

CONTINUE
Cash flow- This is defined as a type of statement which consists detailed
information regarding to cash receipts and payments activities (NGUYEN
and NGUYEN, 2020). It is prepared by help of three activities such as
operational, financial and investing. It includes such information:
 Cash receipts
 Cash payments
 Net cash flow

Importance of both cash flow and income
statement for investors
Role of income statement for investors: The investors want detailed
information about company’s profitability and expenses during an
accounting cycle.
Role of cash flow statement for investors: The cash flow statement is
useful for investors to provide information about past years’ cash flow
that is used for making projection of upcoming cash flows.

PART (B) Examination of cash flow of
each company
(a) Major source and uses of cash of each firm.
BHP limited:Sources of cash:
Name of item 2017 (Data in $ million) 2018 (Data in $ million) 2019 (Data in $ million)
Profit/(loss) before taxation 10322 14751 15049
Cash generated from operations 19377 22949 23428
Dividends received 636 709 516
Interest received 164 290 443
Trade and other receivables 315 0 0
Inventory 0 0 298
Sale of assets 648 89 145
Trade and other payables 337 719 406
Interest bearing liabilities 1577 528 250
Divestment of subsidiaries 186 0 4
Royalty-related taxation refunded 501 17 59
Uses of cash
Name of item 2017 (Data in $ million) 2018 (Data in $ million) 2019 (Data in $ million)
Repayment of interest bearing liabilities 7120 4188 2604
Non-controlling interests 16
Purchase of shares by Employee Share Ownership Plan (ESOP) Trusts 108 171 188
Dividends paid (Financing activity) 2921 5220 11395
Dividends paid to non-controlling interests 581 1582 1198
Purchases of property, plant and equipment 4252 4979 6250
Exploration expenditure 968 874 873
Net investment 234 0 630
Trade and other receivables 0 662 211
Inventory 679 182 0
Other investing 153 141 289
Net income tax and royalty-related taxation paid 2585 4935 5999
Settlement of cash management related instruments 140 292 296
Interest paid 1149 1177 1346
Provisions and other assets and liabilities 325 7 125
Net finance costs 1304 1245 1064
Impairments of property 188 147 264
Depreciation and amortization expense 7719 6288 5829

Continue (a)
Santos limited-Sources of cash:
Name of item 2017 (Data in $ million) 2018 (Data in $ million) 2019 (Data in $ million)
Receipts from customers 3217 3740 4266
Dividends received 12 6 15
Interest received - - 37
Pipeline tariffs and other receipts 66 106 146
Other investing activity 10 26 13
Insurance - - 28
Proceeds from disposal of non-current assets 145 - 10
Net proceeds from issues of ordinary shares 149 - 0
Drawdown of borrowings 783 1193 592
Uses of cash
Name of item 2017 2018 2019
Payments to suppliers and employees 1611 1816 1892
Restoration expenditure 37 36 24
Exploration and evaluation seismic and studies 71 98 83
Royalty and excise paid 57 85 90
Borrowing costs paid 254 194 227
Income taxes paid 28 69 30
Royalty-related taxes paid 15 13 97
Exploration and evaluation assets 146 66 222
Oil and gas assets 483 490 619
Other land, buildings, plant and equipment 5 10 18
Acquisitions of oil and gas assets 49 10 18
Acquisition of subsidiary, net of cash acquired 1933 177
Borrowing costs paid 6 6 15
Repayment of borrowings 2242 220 1474
Purchase of shares on-market 8 10 31
Dividend paid (Financing ) - 73 251
Repayment of lease liabilities - - 87

Continue (a)
Funtastic limited:Sources of cash:
Name of item 2017 (Data in $
million)
2018 (Data in $
million)
2019 (Data in $
million)
Receipts from customers 61731 46463 31119
Interest and other investment
income received
439 2 1
Proceeds from sale of International 0 126 0
Proceeds from borrowings 3647 2630 5666
Cash generated 834 0 0
Income tax refund 0 49 29
Proceeds from share issue 0 8355 8232
Uses of cash
Name of item 2017 (Data in $
million)
2018 (Data in $
million)
2019 (Data in $
million)
Payments to suppliers and
employees
60897 54777 38616
Cash utilized 0 8314 7497
Income tax paid 25 0 0
Interest and other costs of finance
paid
3559 1917 562
Payments for plant and equipment 888 145 5
Payments for other intangible
assets
540 281 147
Repayment of commercial bills 0 0 5136
Security deposit paid 0 0 50
Costs from share issue 0 0 784

(b) Trend in cash flow of each firm from operating
activity.
2017 (Data in $ million) 2018 (Data in $ million) 2019 (Data in $ million)
15500
16000
16500
17000
17500
18000
18500
16804
18461
17871
Cash flow from operating activity OF BHP LTD.

Continue (b)
2017 (Data in $ million) 2018 (Data in $ million) 2019 (Data in $ million)
0
500
1000
1500
2000
2500
1248
1578
2046
Cash flow from operating activity OF SANTOS LTD.

Continue (b)
2017 (Data in $ million) 2018 (Data in $ million) 2019 (Data in $ million)
-12000
-10000
-8000
-6000
-4000
-2000
0
Cash outflow from operating activity of funtastic ltd.

(c)Comparison of cash flow from operations and net profit
after tax.
BHP limited: 2017 (Data in
$ million)
2018 (Data in
$ million)
2019 (Data in
$ million)
Net profit
after tax
6222 7744 9520
Cash flow
from
operations
16804 18461 17871
2017 (Data in $
million)
2018 (Data in $
million)
2019 (Data in $
million)
0
5000
10000
15000
20000
25000
30000
6222 7744 9520
16804 18461 17871
Diff erence between net
profi t after tax and cash
fl ow from operations
Net profit after tax Cash flow from operations

Are firms have enough cash flow to pay all capital
expenses (d)
 BHP limited: In the context of this company, it can be find out that they generated
cash inflow in all three years with a good amount.
 Santos limited: The cash flow from operating activities has been raised year by
year of this company.
 Funtastic limited: In the aspect of above company, it can be find out that there is
negative cash flow in all three years from operating activities.

Did the cash flow from operations cover the dividend
payment made by the firm (e).
BHP limited: 2017 (Data in
$ million)
2018 (Data in
$ million)
2019 (Data in
$ million)
Dividend paid 2921 5220 11395
Cash flow
from
operations
16804 18461 17871
2017 (Data in $ million)
2018 (Data in $ million)
2019 (Data in $ million)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2921
5220
11395
16804
18461
17871
BHP LIMITED
Dividend paid Cash flow from operations

CONTINUE (e)
Santos
limited:
2017 (Data in
$ million)
2018 (Data in
$ million)
2019 (Data in
$ million)
Dividend paid 0 73 251
Cash flow
from
operations
1248 1578 2046
2017 (Data in $ million)
2018 (Data in $ million)
2019 (Data in $ million)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0
73
251
1248
1578
2046
Santos limited
Dividend paid Cash flow from operations

How firm invested excess cash flow (f)
BHP limited:
0
1500
3000
4500
4252
968
234153
Capital expenditure
by BHP limited ($
million) in year 2017
0
3000
4979
874 141
Capital
expenditure by
BHP limited ($
million) in year
2018
0
3000
6000
6250
873 289 630
Capital expenditure by
BHP limited ($ million)
in year 2019

CONTINUE (f)
Santos limited:
Investigati
on of
assets
Oil and
gas assets
Other
fixed
assets
Acquisition
of oil and
gas assets
Borrowing
costs
Capital
expenditure by
Santos limited
($ million) in
year 2017
Investigation
of assets
Oil and gas
assetsOther fixed
assets
Acquisition of
oil and gas
assets
Acquisition of
subsidiary
Costs
associated
with
acquisition
Borrowing
costs
Capital expenditure by
Santos limited ($
million) in year 2018
Investigation
of assets
Oil and gas assets
Other fixed
assets
Acquisition of
assets
Acquisition of
subsidiary
Costs associated
with acquisitionBorrowing costs
Capital expenditure by
Santos limited ($ million) in
year 2019

Uses of working capital as a source or
uses of cash (g)
Cash source
2017 2018 2019
Trade and
other
receivables
315 0 0
Trade and
other
payables
337 719 406
Inventories 0 0 298
Cash uses
Inventories 679 182 0
Trade and
other
receivables
662 211

The items which affected cash flow of each firm (h).
BHP limited-
 Higher capital expenses- this company made huge capital expenses which resulted in
negative cash flow from investing activities
Santos limited:
 Positive operating activities- in all three years, company generated more number of cash
receipts which resulted in cash inflow
Funtastic limited:
 Higher payment of operating activities- This company paid a number of expenses due to
higher operations that resulted in cash outflow in each year

Trend in capital expenses of each firm (i).
2 0 1 7 ( $
Million )
2 0 1 8 ( $
Million )
2 0 1 9 ( $
Million )
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
Capital expenses
MADE BY BHP
LIMITED
2017 ($ Million) 2018 ($ Million) 2019 ($ Million)
689
2525
1074
Capital expenses
made by santos
limited
2017 ($ Million) 2018 ($ Million) 2019 ($ Million)
1428
426
152
Capital expenses
made by funtastic
limited

Trend in dividend (j).
2017 (Data
in $ million)
2018 (Data
in $ million)
2019 (Data
in $ million)
2921
5220
11395
Dividend paid by
bhp limited
2017 (Data in
$ million)
2018 (Data in
$ million)
2019 (Data in
$ million)
0
73
251
Dividend paid by
santos limited

Trend in net borrowings (k).
2017 (Data in $
million)
2018 (Data in $
million)
2019 (Data in $
million)
7156
4406
2764
Net borrowings of
bhp limited
2017 (Data in $
million)
2018 (Data in $
million)
2019 (Data in $
million)
783
1193
592
Net borrowings of
santos limited
2017 (Data in $
million)
2018 (Data in $
million)
2019 (Data in $
million)
3647
2630
5666
Net borrowings by
funtastic limited

Trend in working capital accounts (l)
BHP limited 2017 (Data in $
million)
2018 (Data in $
million)
2019 (Data in $
million)
Working capital 16804 17561 17397

2. Financial strength of each company.
BHP Limited:
 The key plus point of this company is that they generated huge amount of cash
inflow from operating activities in all three years. It became possible because of
effective management of operational income and expenses.
Santos limited:
 The strength of this company is that their cash flow from operating activities
increased in a progressive manner. It shows that company improved their
performance of operations.

CONTINUE…
Funtastic limited:
 In year 2018, company generated cash inflow from overall activities. This shows
that they focused on all three activities equally.
 Company produced positive cash inflow from financing activities which shows
that they managed their debt and shares in all three years appropriately.
 This company purchased their assets wisely by using a small amount of loan
without facing any loss.

3. Selection of a company for lending purpose.
If I would be given chance to select one company for lending purpose than I will
select Funtastic limited. The rationale behind this is that among three companies, this
is the only one whose cash flow from financing activities is positive. It indicates that
this company will be able to payback debt amount in an effective manner.

CONCLUSION
On the basis of above project report, this can be concluded that cash flow statement is
one of the key statement in order to measure efficiency of cash management. It is
important for companies to manage cash inflow from all three activities so that
overall cash flow can be enhanced.

REFERENCES
Barker, R., 2019. Corporate natural capital accounting. Oxford Review
of Economic Policy, 35(1), pp.68-87.
Zhao, J., 2020. Accounting for the corporate cash increase. European
Economic Review, 123, p.103393.
NGUYEN, D.D. and NGUYEN, A.H., 2020. The impact of cash flow
statement on lending decision of commercial banks: evidence from
Vietnam. The Journal of Asian Finance, Economics, and
Business, 7(6), pp.85-93.