Cash Flow Analysis and Financial Performance of Three Corporations

This report provides a comprehensive analysis of the financial performance of three companies: BHP Limited, Santos Limited, and Funtastic Limited, focusing on their cash flow statements. The report is divided into two parts, with Part A reviewing income statements and cash flow statements, and Part B examining the consolidated cash flows of BHP Limited. It explores the major sources and uses of cash, trends in cash flow from operating activities, and the relationship between cash flow from operations and net profit after tax for each company. Furthermore, it assesses whether the firms have sufficient cash flow to cover capital expenses and dividend payments, and how they invest their excess cash flow. The analysis includes detailed breakdowns of capital expenditures and comparisons of financial data over a three-year period, concluding with a company selection for lending purposes based on cash flow analysis.

CORPORATE
ACCOUNTING

ABSTRACT
The report abstracts about discussion on financial performance of three different
companies named as: BHP limited, Santos limited and Funtastic limited in terms of cash flows.
Under the report, various kinds of elements are interpreted for each of above mentioned
companies so that evaluation of performance can be done. In the end section of report, selection
of a company has been done for lending purpose in accordance of cash flow analysis.

Contents
ABSTRACT....................................................................................................................................2
INTRODUCTION...........................................................................................................................4
MAIN BODY..................................................................................................................................4
Part A...........................................................................................................................................4
Part B............................................................................................................................................5
CONCLUSION..............................................................................................................................24
REFERENCES..............................................................................................................................25

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. (Barker,
2019). The report is based on analyzing role and issues of cash flow statements for three separate
companies named as BHP limited, Santos limited and Funtastic limited. The report is categorized
into two parts: A and B. In the part A, review of information of cash flow and income statement
has been done. While in part B, examination of consolidated cash flows has been performed in
relation to BHP limited.
MAIN BODY
Part A
Review of information of income statement and cash flow.
In the aspect of financial statements, there are mainly three types of statements such as income
statement, balance sheet and cash flow statement. All these statements play a key role and
contains a detailed information about different aspects. Underneath, a detailed understanding of
these financial statements has been done in such manner:
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- In the income statement, information about total sales revenue is included
that is measured in accordance of number of units sold and price per unit (Zhao, 2020).
 Cost of sales- The total of expenses which occurred in process of manufacturing and
selling a product is included in this statement that is named as cost of goods sold.
 Operating income and expenses- As well as, income statement contains information
about income generated from operations along with expenses occurred in process of
generating income.

 Interest expenses- if a firm had loan and pays interest annually than amount of interest
paid is mentioned under income statement.
 Tax- The sum of tax amount which is paid by a company is also included in this
statement.
 Net profit- In this statement, information regarding to earned net profit is mentioned at
the end of table.
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- In this statement, information about cash receipts value and activities is
included. Along with it provides cash receipts information from three different activities
including operational, financial and investing.
 Cash payments- Along with cash receipts, it consists information regards to cash payment
activities from three different activities.
 Net cash flow- The amount of net cash flow which is generated from three different
activities is also mentioned in this statement.
Importance of both cash flow and income statement for investors.
For investors, it is essential to have complete information about financial aspect of a company so
that they can take decisions accordingly. Basically, investors rely on various kinds of financial
statements in order to get useful information.
Role of income statement for investors:
The investors want detailed information about company’s profitability and expenses during an
accounting cycle (Paolone, 2020). This can be come possible only because of prepared income
statement of a company. As by help of this statement, investors can know about profit earned by
company as well as this information can be used to measure value of earnings per share. It
addition to this, income statement is also useful for investors to provide information related to

number of expenses and activities for these. On the basis of this useful information, investors
take important decision for making further investment in companies’ security and shares.
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 (ANIL, LAKHSMI and
SCHOLAR, 2019). In addition to this, cash flow statement enables investors to know about those
activities which are leading as higher expenses. On the grounds of this information, investors
determine about whether they should make investment or not.
Part B
1. Examination of cash flow of each company.
(a) Major source and uses of cash of each firm.
BHP limited: On the basis of below mentioned (Appendix 1), this can be find out that
company has different kinds of sources and uses of cash which is explained below in
such manner:

Santos limited-

Funtastic limited:

(b) Trend in cash flow of each firm from operating activity.
BHP limited: 2017 (Data in $
million)
2018 (Data in $
million)
2019 (Data in $
million)
Cash flow from
operating activity
16804 18461 17871

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.
Trend- the above chart is indicating that there is cash inflow in all three years 2017, 2018
and 2019. Though, value of cash inflow is fluctuating such as in year 2017, it was of
$16804 million which raised till $17561 million. But in year 2019, it decreased and
became of $17397 million. The rationale behind this is that there are more number of
operational activities that are resulting as higher cash receipts as compared to cash
payments.
Santos limited: 2017 (Data in $
million)
2018 (Data in $
million)
2019 (Data in $
million)
Cash flow from
operating activity
1248 1578 2046

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.
Trend- The above mentioned chart is indicating that there is significant growth in
company’s net cash inflow in all three years. Such as in year 2017, cash inflow was of
$1248 million that raised and became of $1578 and $2046 million for year 2018, 2019
respectively. This good performance of company is indicating that they are able to
manage their operations in an effective manner which is leading as positive cash flows.
Funtastic limited: 2017 (Data in $
million)
2018 (Data in $
million)
2019 (Data in $
million)
Cash outflow from
operating activity
-2750 -10182 -8030
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.

Trend- The above mentioned chart is showing that this company is not able to produce
cash inflow from operating activities. Such as in year 2017, there was cash outflow was
of $-2750 that raised in next year and became of $-10182. Though, in year 2019 value of
cash outflow reduced by a little margin till $-8030 million. The rationale behind this poor
performance is lack of control over operational expenses and ineffective management of
cash.
(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
Analysis- the above mentioned chart is indicating that there is significant difference
between cash flow from operations and net profit after tax. In each year value of cash