Corporate Accounting: Cash Flow Analysis of Three Firms

This report presents a detailed analysis of the financial performance of BHP Ltd, Santos Ltd, and Funtastic Ltd, primarily focusing on their cash flow statements. The study examines the role of income statements and cash flow statements for investors, followed by a deep dive into the cash flow trends of each company from operating activities. It compares cash flow from operations with net profit after tax, assessing the companies' abilities to cover capital expenditures and dividend payments. The analysis further explores how each firm invested its excess cash flow, providing insights into their financial strategies. The report aims to evaluate the financial health and performance of the three companies, offering valuable insights for investors and stakeholders. This assignment is contributed by a student to be published on the website Desklib, a platform providing AI-based study tools for students.

CORPORATE
ACCOUNTING

ABSTRACT
The study summarizes discussion of financial results of three separate firms: BHP Ltd,
Santos Ltd, and Funtastic Ltd based on cash flow. In this study, with respect to above-mentioned
organizations, different types of aspects are thoroughly analyzed to assess performance. In later
part of the study-report, evaluation of has been done of such companies as to select most
appropriate company among these for the lending purpose.

Contents
ABSTRACT...............................................................................................................................................2
INTRODUCTION.....................................................................................................................................4
MAIN BODY.............................................................................................................................................4
Part A......................................................................................................................................................4
Part B.......................................................................................................................................................6
CONCLUSION........................................................................................................................................29
REFERENCES........................................................................................................................................30

INTRODUCTION
There are quite a large number of accounting processes in finance field and corporate
accounting is most significant accounting process. It can be characterized as process of
accounting dealing with operation of compiling financial statement comprising cash-flows
statement, income-statement etc (Warren and Jones, 2018). The study is focused on the review of
cash-flows statement roles and concerns in context of three different companies namely: BHP
limited, Santos Ltd and Funtastic Ltd. The study is broken down into 2 sections: A and B.
Analysis of cash flows and income statement done under Part-A. Whereas the consolidated cash-
flows of all three companies have been evaluated to answer different questions.
MAIN BODY
Part A
Reviewing information stated in income statements and cash-flows statements.
A company's financial statements comprises primarily three forms of
statements namely: Income-statement, Company's balance sheet and cash-flows statement report.
All these statements perform a major part and provide in-depth information regarding various
dimensions of company (Thanh, 2016). Below, a thorough analysis of financial statements being
performed in effective way, as follows:
Income statement- This can be perceived as a sort of statement that contains incomes and
expenditure particulars within a given time span. This Statement mainly contains the following
information:
· Sales revenue- Net sales revenue or turnover details stated by the sales less sales return
under income statement.
· Cost of sales- Total costs incurred in the production and distribution of a item are
mentioned in this head, which is referred to as costs of sales.
· Operating income and expenditures- In addition, income statement provides details on
operating incomes generated alongside expenses made in relation to such income
generation.

· Interest Expenses- if corporation has borrowed and interest amount paid periodically then
such aggregate amount of interests paid is shown under the head of finance cost in
the income-statement.
· Tax- It also contains the details of tax rate and amount of liability of income tax.
· Net profit- This head under income-statement consists of net amount of profits earned by
company during a particular period after providing all business expenses.
Cash flow- This is characterised as a statement consisting of comprehensive details concerning
cash in-flows and cash payouts. this is framed by combining cash flow of three major
activities: operational, investment and financial activities. Here below is discussion about all the
major heads of this statement, as follows:
Cash receipts- Particulars on the amount of cash proceeds and the operations is specified in cash-
flow statement. It mainly offers details concerning cash proceeds from 3 distinct operations
involving operational, investment and financial activities (Kristanti and Herwany, 2017).
Cash payments- It contains of details about cash payments transactions under such three separate
activities and deducting from all cash receipts.
Net cash flow- The amount of net cash flow which is generated from three different activities is
also mentioned in this statement.
Importance/significance of cash-flow and income statement in context of investors.
For stakeholders or investors, proper comprehension concerning a corporation 's fiscal dimension
is crucial for them to be able to undertake decisions appropriately. Investors are largely
dependent on different forms of fiscal statements to access crucial information.
Role of income statement for investors:
The investors require reliable information mostly on profits and spending of the corporation over
a reporting period. This could only become feasible due to company's reported income statement.
As with the aid of this, they can know regarding company-earned profit, as well as these details
could be applied to determine earning-per share. Moreover, income statement also helpful in
providing investors with information pertaining to the proportion of costs and business activities.

Based on this valuable detail, investors can take decisions to make investments in the securities
and stocks of a corporation.
Role of cash flow statement for investors:
The cash-flows statement is also beneficial for investors so as to obtain information
regarding cash flows trend of more than one period which is used to make projections of
upcoming years cash-flows. Furthermore, cash flows statement allows investors to fully
understand regarding certain operations that are causing higher costs. Investors decide on the
basis of this knowledge whether they can make an investment in company (Unerman,
Bebbington, and O’dwyer, 2018).
Part B
1. Examination of cash flow of each company.
(a) Major source and uses of cash of each firm.
BHP limited: Based on below sad it can be ascertained that the corporation has various
types of cash generation sources and application which are described here, as
follows:

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 chart described indicates that cash inflows occurred throughout 2017, 2018 and
2019. While, in year 2017, the amount of cash-inflow fluctuates, this was $16804 million that
rose to $17561 million. however this started to shrink in year 2019, and then it reached
to $17397 million. The reason underlying this decline is that more spending towards operational
activities results in more cash outlays than cash receipts (Annual report of BHP limited for year
2017).
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 aforementioned chart indicates a substantial improvement in net cash
inflows of the corporation during three years. It shows that in year- s2017, the cash
inflow were $1248 million which reached to $1578 and $2046 million within increase in
year 2018 and 2019. This corporation 's positive success shows that company is able to
successfully handle their operational cash flows, contributing to 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- Abovementioned graph indicates that this corporation is unable to generate cash inflows
from operational activities. Cash outflow were $-2750 in year-2017, which rose over next year
and reached to $-10182. Although, the cash outflows decreased by a small slight amount to $-
8030 million in year-2019. The reason for this adverse result is inability of controlling over
operating costs and inadequate cash handling (Annual report of BHP limited for year 2018).
(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- As presented in above chart this has been analyzed that company has reported profit as
well as positive cash-flow simultaneously during 2017 to 2019. Although there is decline in cash
flow in year 2019 but company’s net profitability position has been improved over the year.
Overall analysis shows that company’s profitability and liquidity position is quite good (Annual
report of BHP limited for year 2019).

(d) Are firms have enough cash flow to pay all capital expenses.
BHP limited: In relation to this corporation, it has been analyzed that
company generated a decent cash inflow throughout said period. Company's cash inflows
during three years are $16804, $17561 and $17397 m respectively. This shows that
company has adequate cash-flows to spend towards capital expenditure.
Santos limited: The cash inflows from operating activities of organization has been
enhanced year over year. This was $1248 and $1578 in year 2017 and 2018 which
increased to $2046 million, this increase show that company can generate enough cash-
flows for capital expenditure.
Funtastic limited: In case of this company, this has been observed that there's negative
cash flows from operating activities throughout three years. This suggests bad results and
also that the company does not even have adequate cash flows to make capital
expenditures.
(e) Did the cash flow from operations cover the dividend payment made by the firm (if any)?
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
Analysis- Above graph displays that as dividend paid amount has been increased
company’s cash-inflows form operational activities has been declined which is indication
that company’s cash-flows from operational activities covered dividend’s payments made
by corporation.
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
Analysis- In case of this company, company has not paid any dividend in year 2017 but
in 2018 and 2019 company paid dividend. Notable aspect here is that company’s cash-
inflow form operational-activities not declined with dividend payment. This shows that
company’s cash-flows from operational activities are not covered dividend’s payments
made by corporation.
Funtastic limited- Company has no history of dividend payment as well as there is
negative cash-flows from operations over said period.
(f) How firm invested excess cash flow.
BHP limited:
2017- The corporation had operational cash inflow amounting $16804 and company has
spent cash $5607 million towards capital expenditure. The summary of such capital-
expenditure being provided below, as follows:
Item Amount ($ million)
Purchases fixed assets 4252
Investigation expense 968
Net investment and funding of equity 234

accounted investments
Other investment 153
Total 5607
Purchases fixed
assets Investigation
expense Net investment
and funding of
equity accounted
investments
Other investment
0
500
1000
1500
2000
2500
3000
3500
4000
4500
4252
968
234 153
Capital expenditure by BHP limited ($
million) in year 2017
2018: The corporation had operational cash inflow totaling $18461, out of which $5994
million spend towards capital expenditures. The overview of this capital spending being
shown below in the following manner:
Item Amount ($ million)
Purchases fixed assets 4979
Investigation expense 874
Other investment 141
Total 5994

Purchases fixed assets Investigation expense Other investment
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
4979
874
141
Capital expenditure by BHP limited
($ million) in year 2018
2019: The cash flows from operational activities has been utilized towards capital
expenditures, as shown below:
Item Amount ($ million)
Purchases fixed assets 6250
Investigation expense 873
Other investment 289
Net investment and funding of equity
accounted investments
630
Total 8042

Purchases fixed
assets Investigation
expense Other investment Net investment
and funding of
equity accounted
investments
0
1000
2000
3000
4000
5000
6000
7000 6250
873 289 630
Capital expenditure by BHP limited
($ million) in year 2019
Santos limited:
2017- The utilization of cash inflows totaling $1248 million had been done
towards following capital expenditures:
Item Amount ($ million)
Investigation of assets 146
Oil and gas assets 483
Other fixed assets 5
Acquisition of oil and gas assets 49
Borrowing costs 6
Total 689

Investigation 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
2018: This organization in year 2018, has invested its cash flows in the following capital
expenditures:
Item Amount ($ million)
Investigation of assets 66
Oil and gas assets 490
Other fixed assets 10
Acquisition of oil and gas assets 10
Acquisition of subsidiary 1933
Costs associated with acquisition 10
Borrowing costs 6
Total 2525

Investigation of assets
Oil and gas assets
Other fixed assets
Acquisition of oil
and gas assets
Acquisition of
subsidiary
Costs associated with
acquisitionBorrowing costs
Capital expenditure by Santos limited
($ million) in year 2018
2019: This corporation has spent cash flow generated through operations in year 2019
towards following expenditures:
Item Amount ($ million)
Investigation of assets 222
Oil and gas assets 619
Other fixed assets 18
Acquisition of assets 18
Acquisition of subsidiary 177
Costs associated with acquisition 5
Borrowing costs 15
Total 1074

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
Funtastic limited: This company not have positive cash balance to do capital investments.
However, company acquired plant and machinery by taking loan.
(g) Uses of working capital as a source or uses of cash.
BHP Ltd use of amount of working capital as source or usage of cash-funds in the
following manner:
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

(h) The items which affected cash flow of each firm.
There are variety of items that have been impacted to each company's cash flows as
discussed below:
BHP limited-
Higher capital expenditure: Company has undergone massive capital expenditures which
have resulting in adverse cash flows from investment activities.
Increased loan repayment-This organisation taken higher loans and thereby paying
higher interest, which is the trigger of adverse cash flows from financing activities.
Operational activities-The corporation has a larger range of activities delivering more
revenue receipts owing to cash inflows from operational activities.
Santos limited:
Increased cash generating operational activities- Throughout the said, the organization
produced the most cash receipts form increased operational activities.
Investments: Corporation has made increased acquisitions of tangible fixed assets, that
lead to increased cash out flows from investing activities.
Increased Debts-The business obtained higher amount of mortgage and paying a large
sum of cash towards loan-repayment, that led in an adverse cash flow through financing
activities (Annual report of Santos limited for year 2019).
Funtastic limited:
Higher capital outlays for corporate activities: Corporation paid variety of
operational expenses which resulted in cash outflows last year.
Acquiring capital assets: Purchase of fixed assets by taking loans led to outflows from
investing activities.
Borrowing interest: Company has paid interest on loan taken for acquisition of
fixed assets which resulted in negative cash-flow from financing activities (Annual report
of Funtastic limited for year 2017).

(i) Trend in capital expenses of each firm.
BHP limited 2017 ($ Million) 2018 ($ Million) 2019 ($ Million)
Capital expenses 5607 5994 8042
2 01 7 ( $ Mi l l i on) 2 01 8 ( $ Mi l l i on) 2 01 9 ( $ Mi l l i on)
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
Capital expenses MADE BY BHP
LIMITED
Trend- This chart indicates that the organization has raised the size of its investments
year over year. That's because, in such periods, they have generated stronger cash
flows from operations.
Santos limited 2017 ($ Million) 2018 ($ Million) 2019 ($ Million)
Capital expenses 689 2525 1074

2017 ($ Million) 2018 ($ Million) 2019 ($ Million)
689
2525
1074
Capital expenses made by santos
limited
Trend- The following chart indicates that the organization has varied the amount of capital
spending over 3 years. The larger spending was of $2525 m in 2018, whereas the minimum
spending was of $689 m in year 2017 (Annual report of Santos limited for year 2018).
Funtastic limited 2017 ($ Million) 2018 ($ Million) 2019 ($ Million)
Capital expenses 1428 426 152
2017 ($ Million) 2018 ($ Million) 2019 ($ Million)
1428
426
152
Capital expenses made by funtasti c
limited

Trend- The capital investment graph of corporation indicates a decreasing trend in the amount of
expenditures. This is attributed to negative cash balances from operating activities
throughout three years (Annual report of Funtastic limited for year 2018 & 2019).
(j) Trend in dividend.
BHP limited 2017 (Data in $
million)
2018 (Data in $
million)
2019 (Data in $
million)
Dividend paid 2921 5220 11395
2017 (Data in $ million) 2018 (Data in $ million) 2019 (Data in $ million)
2921
5220
11395
Dividend paid by bhp limited
Trend- This graph indicates that the corporation paid dividends to the shareholders on a
progressive basis. They paid maximum dividend of amounting $11395 m in 2019,
because as cash inflows from ongoing operations were greater this year.
Santos limited 2017 (Data in $
million)
2018 (Data in $
million)
2019 (Data in $
million)
Dividend paid 0 73 251

2017 (Data in $ million) 2018 (Data in $ million) 2019 (Data in $ million)
0
73
251
Dividend paid by santos limited
Trend- The organization didn't made dividend payments in 2017, although the dividend
paid in the subsequent two years of $73 m and $251 m respectively.
(k) Trend in net borrowings.
BHP limited 2017 (Data in $
million)
2018 (Data in $
million)
2019 (Data in $
million)
Net borrowings 7156 4406 2764
2017 (Data in $ million) 2018 (Data in $ million) 2019 (Data in $ million)
7156
4406
2764
Net borrowings of bhp limited
Trend- The above graph indicates that reliance of this corporation over borrowing has
been decreased year after year. Least borrowing were $2764 m in the year 2019.
Santos limited 2017 (Data in $ 2018 (Data in $ 2019 (Data in $

million) million) million)
Net borrowings 783 1193 592
2017 (Data in $ million) 2018 (Data in $ million) 2019 (Data in $ million)
783
1193
592
Net borrowings of santos limited
Trend- This graph uncovers that maximum borrowings amounted to $1193 m in 2018, whereas
minimum borrowings amounted to $592 m in 2019 indicating overall downwards trend (Annual
report of Santos limited for year 2017).
Funtastic limited 2017 (Data in $
million)
2018 (Data in $
million)
2019 (Data in $
million)
Net borrowings 3647 2630 5666
2017 (Data in $ million) 2018 (Data in $ million) 2019 (Data in $ million)
3647
2630
5666
Net borrowings by funtasti c limited

Trend- This graph discloses that maximum borrowings amounted to $5666 m was in
2019, whereas minimum borrowings amounted to $2630 m was in 2018 indicating
overall upward trend.
(l) Trend in working capital accounts.
BHP limited 2017 (Data in $
million)
2018 (Data in $
million)
2019 (Data in $
million)
Working capital 16804 17561 17397
Trend: This chart demonstrates the trend of BHP's working capital. It indicates that the
proportion of the corporation 's working capital have been improved year after year. As
seen in 2017, $16804 m had been increased during next 2 years. However there is slight
decline in year 2019 in working capital showing overall declining trend after 2018.
1.Financial strength of each company.
On the grounds of above discussion on cash flow condition of each organization, this
has been observed that each corporation has some strengths and shortcomings. It relies on
businesses how effectively they work with weaknesses and utilizing their strengths. Below the
strengths of the three businesses listed above, described as follows:
BHP Limited:
 The major positive point of such organization is that it has generated an immense sum of
cash-inflows from operating activities across three years. This was made possible by the
efficient control of gross cash revenues and expenditures.
 Excessive capital inflows from running activities is used by the corporation in an
acceptable manner to buy various forms of the fixed assets.
 Aside from this company's reliance on borrowings is quite low which indicates its
good solvency and liquidity performance.
 Santos limited:

 Core strength of this organization is that cash flows from corporate operations has grown
in progressive way. It indicates that the organisation has increased its financial
productivity.
 The corporation paid dividend only because there was a significant amount of cash
inflows, and could not suffer any burden to fund dividend.
 As in year-2018, organisation created net cash inflows from all major three activities,
demonstrating that they offset cash outflows from financing as well as investment
activities at end of a year.
Funtastic limited:
 In 2018, the organisation reported cash inflows from its overall operations. This indicates
that they were similarly concentrated towards such major three activities.
 The business created positive cash inflows through financing activities that reveal that
they handled their debts and shares properly across three years.
 This organisation has strategically acquired fixed assets by taking loan as to control
maintain their cash-flow position.
2.Selection of a company for lending purpose.
If I have a turn to choose one corporation for the purpose of lending, then I would prefer
BHP Limited as this company has reported positive cash flow as well as increase in profits over
2017, 2018 and 2019. Thus, there is less chances that company will not repay debts, also as per
present financial position it is expected that company will perform better in following years.
CONCLUSION
From above study this has been articulated that corporate accounting is essential aspect in
finance-field which deals with wide range of activities especially financial reporting and
analysis. This also provide relevant data for effective comparison of tow or more corporation. As
in study three corporation has been selected and comparative analysis of each aspect of such
corporation has been done to assess the comparative financial performance of such corporations.

REFERENCES
Books and Journals:
Warren, C.S. and Jones, J., 2018. Corporate financial accounting. Cengage Learning.
Thanh, T.T., 2016. The role of Ethics and Corporate Governance in financial
accounting (Doctoral dissertation, Vietnamese-German University).
Kristanti, F.T. and Herwany, A., 2017. Corporate governance, financial ratios, political risk and
financial distress: A survival analysis. Accounting and Finance Review (AFR) Vol, 2(2).
Unerman, J., Bebbington, J. and O’dwyer, B., 2018. Corporate reporting and accounting for
externalities. Accounting and business research, 48(5), pp.497-522.
Online:
Annual report of BHP limited for year 2017. [online] available through:<
https://www.bhp.com/-/media/documents/investors/annual-reports/2017/
bhpannualreport2017.pdf>
Annual report of BHP limited for year 2018. [online] available through:<
https://www.bhp.com/-/media/documents/investors/annual-reports/2018/
bhpannualreport2018.pdf>
Annual report of BHP limited for year 2019. [online] available through:<
https://www.bhp.com/-/media/documents/investors/annual-reports/2019/
bhpannualreport2019.pdf>
Annual report of Santos limited for year 2017. [online] available through:<
https://www.santos.com/wp-content/uploads/2020/02/2017-annual-report.pdf>
Annual report of Santos limited for year 2018. [online] available through:<
https://www.santos.com/wp-content/uploads/2020/02/2018-annual-report.pdf>
Annual report of Santos limited for year 2019. [online] available through:<
https://www.santos.com/wp-content/uploads/2020/02/2019-annual-report.pdf>
Annual report of Funtastic limited for year 2017. [online] available through:<
https://www.annualreports.com/HostedData/AnnualReportArchive/f/ASX_FUN_2017.pd
f>
Annual report of Funtastic limited for year 2018 & 2019. [online] available through:<
https://www.annualreports.com/HostedData/AnnualReports/PDF/ASX_FUN_2019.pdf>