Comparative Financial Analysis: Cash Flow Trends in Three Companies

This assignment provides a comparative analysis of the cash flow statements of three companies: Funtastic Limited, BHP Limited, and Santos Limited, across multiple years. Funtastic Limited did not generate excess cash flow from operations and relied on borrowing and share issues for capital expenditure and dividends, while BHP Limited demonstrated strong operating performance, reduced net debt, and increased dividends due to excess cash flow. Santos Limited also generated excess cash flow and distributed dividends sustainably. BHP Limited did not need to utilize working capital accounts beyond cash and equivalents, indicating strong liquidity. Key factors affecting cash flows included BHP's debt reduction, Funtastic's fluctuating cash increases, and Santos's varying investment activities. Capital expenditure trends showed BHP with the highest net cash outflow for investing activities, while Funtastic's investment reduced and Santos showed a significant increase in investment in 2018.

f) If the firm has generated excess cash from operations, how did the firm
invest the excess cash? If not, what were the sources of cash the firm used to
pay for the capital expenditures and/or dividends?
a) Funtastic Limited did not generate excess cash flow from operation in any of three
years, that is, 2016, 2017 and 2018. For capital expenditure and /or dividends they paid it
through borrowing and issues of share.
b) For the firm BHP Limited they did generate excess cash flow, thus, strong operating
performance, enabling BHP to reduce net debt and increase dividends for all the years.
c) For the firm Santos Limited they also generated excess cash flow and they pay
divided to it shareholder on sustainable basis between 10% to 30% in all these three years.
g) Did the firm use the working capital (current asset and current liability)
accounts other than cash and cash equivalents as sources of cash, or uses of
cash? (Answer this question using only Appendix B: Cash flow statement for
BHP Limited).
No, BHP limited has sufficient cash in its balance sheet for its uses or to meet it current
liability. So there is no need to use other than cash and cash equivalent for working capital. It
is done only in case of lack of sufficient working capital in balance sheet. Basically, it
measures company’s liquidity and its ability to meet short-term obligations, as well as fund
operations of the business. This is the ideal position where BHP has more current assets than
current liabilities, and thus has a positive and sufficient net working capital balance.
h) What other major items affected cash flows?
a) BHP reduced its debt during above said three years period.
Its repayment of interest bearing liability (in US $ M for all 3 years) in 2018 was 4,188, in
2017 it was 7,117 and in year 2016 it was 2,781. It is big liability in BHP’s balance sheet. So
for BHP it was main reason.
b) Funtastic net increase in cash in 2018 (in $’ 000) was 67 in 2017 (92) and in 2016 it
was (319). So in 2018 it was positive ($’ 000 ) 67other two years are in negative. This has
affected cash flow in Funtastic Limited.
c) In Santos in 2018 investing activities was lowest at (US$million) (2.373) compared to
other two years which was respectively (534) and (205). Not much investment done specially
during the year 2017, only US $ million 534 and in the year 2016 it was only US $ million

205. Though, it was substantially increased in year 2018 to the level of US $ million 2,373.
Hence, it affected cash flow majorly.
i) What was the trend in capital expenditures for each firm?
Funtastic Limited: Net cash out flow from investing activities: (AU$ 000)
Year 2018 – (298)
2017 – (989)
2016 – (558)
BHP Limited: Net cash out flow from investing activities: (US $ Million)
2018 – (5,921)
2017 – (4,161)
2016 – (7,245)
Santos Limited: Net cash out flow from investing activities: (US $ Million)
2018 – (2,373)
2017 – (534)
2016 – (205)
Net investing cash out flow was maximum in BHP limited as compared to other two companies, that
is, Funtastic Limited and Santos Limited. So we can conclude capital expenditure in BHP remained
highest among these three companies as per data given. BHP’s performance was much better in
investment and capital expenditure. Other two companies, that are Funtastic Limited and Santos
Limited it was very less, though in the year 2018 Santos Limited made good investment compared to
its previous year 2017, it was more than four times jump. But in comparison in Funtatic Limited its
investment reduced substantially to the level of just one third of its previous year to the level of
(AU$’ 000) 298. All three companies have different set of pattern in terms of capital expenditure
and overall investment activities.