Analyzing Cash Flows of Funtastic Limited, BHP Billiton and Santos Limited

Running head: CORPORATE ACCOUNTING
Corporate Accounting
Name of the Student
Name of the University
Author’s Note

1CORPORATE ACCOUNTING
Abstract
The purpose of this report is to undertake analyzing as well as evaluating the cash
flows of Funtastic Limited, BHP Billiton and Santos Limited. This report also shows
the importance of income statement and cash flow statement to the investors. This
report undertakes the analysis of different dimension of the cash flow statements of
these three companies such as key sources of cash, key uses of cash, reasons for
the difference between net income and cash flow from operations, generation of
adequate cash flow for capital expenditure payment, working capital, capital
expenditure trend, dividend trend, net borrowing trend, items having effects in cash
flow statements, trends in working capital account and others.

2CORPORATE ACCOUNTING
Table of Contents
Introduction...................................................................................................................3
Part A............................................................................................................................3
Part B............................................................................................................................4
Requirement 1...........................................................................................................4
Requirement 2...........................................................................................................7
Requirement 3...........................................................................................................8
Conclusion....................................................................................................................9
References.................................................................................................................10

3CORPORATE ACCOUNTING
Introduction
Cash Flow Statement is considered as an important financial statement for
the firms which demonstrate how the changes in income and balance sheet
accounts affect the cash and cash equivalent and this statement breaks the analysis
down in three activities which are operating, investing and financing activities (Ball et
al. 2016). Clear understanding about different aspects of cash flows is needed for
the management of the companies in order to make effective business decisions
(Ball et al. 2016).The main aim of this report is the analysis and evaluation of
different aspects of cash flows in three companies; they are Funtastic Limited, BHP
Billiton and Santos Limited. This report is helpful in building understanding on
different components of cash flow statement.
Part A
Both the income statement and cash flow statement are of great use for the
investors and the reasons are discussed below:
Income Statement – Income statement is considered as a crucial financial report for
the investors who have the need for detailed information prior to invest in a firm. This
statement provides the investors with all the information on sales to profit and
operational efficiency to different other non-operational aspects. All this information
assists the investors in getting a clear and concise picture of the current performance
of the business and the future expectations (Bonner, Clor-Proell and Koonce 2014).
For this reason, it can be considered as a reliable source for judging the condition of
the firms.
More specifically, income statement is important for the investors as it clearly
indicates whether a company is making profit or not. The income statement records
the total revenue and expenses of a business and profit or loss is derived by
subtracting the total expenses from total revenue (Christensen, Glover and Wolfe
2014). Investors can only find this information in the income statement. In addition,
income statements reflect timely update of the operations of the firms since it is
updates more frequently as compared to other financial statements. Since the
income statement provides a clear as well as concise picture of the company’s
current profitability, organizational managers as well as investors constantly review
the income statement for getting the most recent information on the company’s
operations. Investors get the classification of different revenues and expense of the
companies from the income statements (Brazel et al. 2015). All these aspects
implies that income statement is useful for the investors since it provides them with
the required information for investment decision-making.
Cash Flows Statement –Cash flow statement is considered as another crucial
financial statement for the investors since it informs them about the cash position of
the business. For a business to be successful there must be adequate cash in the
business for paying its expenses, bank loans, taxes and payment for the purchase of
new assets (Lewellen and Lewellen 2016). A cash flows statement helps the
investors in determining whether a business has adequate cash for the above
purposes. Income statements do not express anything about the principal payments
of the businesses, but the statement of cash flows informs the investors about where
the company has made the principal payments. As per the cash flow statement,
indication of using cash can be got in certain circumstances like increase in
inventory, extension of credit to the customers, purchase of capital equipment and