Corporate Accounting: Analysis of Company Cash Flows for 3 Firms

This report provides a detailed analysis of the cash flow statements of three companies: Funtastic Limited, BHP Limited, and Santos Limited. The analysis examines the major sources and uses of funds for each firm across three years, focusing on operating, investing, and financing activities. The report assesses trends in cash flows from continuing operations, comparing them to net income and explaining any discrepancies. It investigates whether the firms generated sufficient cash from operations to cover capital expenditures and dividend payments. Furthermore, the report evaluates the investment viability of each firm by considering its ability to generate excess cash from operations and how these funds were utilized. The findings reveal insights into each company's financial health, including their ability to manage cash flows, meet financial obligations, and make strategic investment decisions. The report highlights the importance of cash flow analysis in understanding a company's financial performance and its capacity for sustainable growth.

Corporate Accounting-Analysis of Company Cash flows 1
CORPORATE ACCOUNTING-ANALYSIS OF COMPANY CASHFLOWS
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Corporate Accounting-Analysis of Company Cash flows 2
Corporate Accounting-Analysis of Company Cash Flows
1. (a) Major sources and uses of funds for each of the firms.
Funtastic Limited
The major source of funds for Funtastic limited is cash generated from financing
activities. For instance, in the year 2018 AU$ 8,355 were raised from the proceeds of the issue of
shares. The major uses of fund for Funtastic limited were used in operating activities. AU$
10,182, 2,750 and 7,329 were used in the years 2018, 2017 and 2016 respectively. A
Significantly smaller amount of funds was used in investing activities.
BHP Limited
The major source of funds for BHP Limited for the three years were cash generated from
operating activities. AU$ 18,461, 16,804 and 10,625 were generated in the years 2018, 2017 and
2016 respectively. When it comes to the use, most of the cash for BHP limited were used in
financing activities with AU$ 10,891, AU$ 9,133 being used in 2018 and 2017 respectively. In
2016 AU$ 284 were generated from financing activities while AU $ 7,245 being used for
investing activities.
Santos Limited

Corporate Accounting-Analysis of Company Cash flows 3
The major source of funds for Santos limited are funds generated from operating
activities. For instance, AU $ 1,578, 1,248 and AU $ 840 were provided by financing activities
in the financial periods ended 2018, 2017 and 2016. When it comes to using, the major part of
funds generated by Santos was used in investing activities AU $ 2,373, AU$ 534 and AU $ 205
were used in the financial periods ended 2018, 2017 and 2016 respectively.
(b) Trends in Cash Flows Generated from Continuing Operations for Each of the Firm
Cash flow from continuing operations is the number of funds raised by the company from
the daily business activities that the company is involved with. Daily business activities refer to
the tasks that are undertaken to make a service or a product and deliver it to the desired
customers. For a company to be stable financially, it must be able to consistently generate
enough funds from its operation/ continuing activities to be able to meet its current financial
obligation such as purchase of inventory and also long term obligations such as for financing and
investment activities its desires to undertake.
Looking at the cash flows generated from financing activities for Funstastic Limited, it is
evident that the company is unstable in terms of cash flow. For instance, from 2016 to 2018 the
company used to spend more funds in operating activities than it was able to raise. AU $ 10, 182,
AU $ 2,750 AND AU$ 7, 329 spent in operating activities for financial periods 2018, 2017 and
2016 respectively. This means that the company was not able to raise enough funds from its
daily business activities to meet its short term financial obligations such as payment of suppliers

Corporate Accounting-Analysis of Company Cash flows 4
and employees for the three financial periods. It had to rely on funds raised from financing and
investing activities to be able to meet its operational activities.
As for BHP Limited, the company appears to have raised enough funds from its
continuing operations/ activities than any other company. For the financial periods 2016 to 2018,
the company was able to generate AU $ 22,949 in 2018, 18,612 in 2017 and 12,091 in 2016 from
its operations. This means that the company is doing well in terms of generating cash flows from
daily business activities. A detailed analysis of BHP shows that it was able to raise AU $ 17,561,
AU$ 15,876 and AU$ 9,840 from continuing operations. It is, therefore, true to say that the net
operating cash flows from investing activities for BHP have been increasing from 2016
throughout 2018 as demonstrated by the figures aforementioned above.
Santos Limited was able to generate AU$ 1,578, AU$ 1,248 and AU$ 840 from its
operating activities for the financial periods 2018, 2017 and 2016 respectively. Out of this AU, $
3,740, AU$ 3,217 and AU$ and 2,708 were receipts from customers. For the three financial
periods, the net operating cash flows for Santos have been increasing steadily a sign that shows
that the company is slowly becoming more stable in terms of operating cash flows.
(c) Comparison Between the Cash flow from Operations and the Net Income for BHP
Limited.
The cash flows generated from operations for BHP Limited is greater than the net income
for the three financial periods. For instance, Profit before taxation in the year 2018 was AU$

Corporate Accounting-Analysis of Company Cash flows 5
14,751 while cash generated from operations was AU$ 22,949. The main reason for the
difference in the figures for net income and cash flow generated from operations is because of
the adjustments of depreciation, amortization expenses, impairment of property plant and
equipment, adjustment for financial assets and other intangibles.
(d) Assessing Whether the Firms Were able to Generate Enough Cash Flows from
Operations to Pay for Capital Expenditures
Funtastic Limited
For Funtastic Limited, there was cash outflow utilized in operations of AU $10,182 in
2018 against AU$ 298 used in investing activities (capital expenditures). Out of the AU $ 298
spend in investing activities AU$ 145 was utilized in payment for plant and equipment, AU $
281 spend in payment for other intangible assets while AU$ 126 was raised from the sale of an
international subsidiary. In 2017, net cash outflow utilized in operations amounted to AU$ 2,750
while cash generated from operations amounted to AU$ 834 against AU$ 989 that was spent in
investing activities. In 2016 AU$ 7,329 was utilized in operating activities. Cash outflow used in
investing activities amounted AU$ 558 in which AU$ 884 were used in payment for other
intangible assets.

Corporate Accounting-Analysis of Company Cash flows 6
BHP Limited
BHP Limited generated AU$ 22,949 in 2018, AU$ 18,612 in 2017 and AU$ 12,091 in
2016 against AU$ 2,373 in 2018, AU$ 434 in 2017 and AU$ 205 used in investing activities.
From these figures, it is evident that the company was able to generate enough cash flows from
its operations to pay for all of its capital expenditures. For instance, AU $ 4,979 was used in
2018 to purchase property plant and equipment. AU$ 3,697 and AU$ 5,707 also spent in the
purchase of property plant and equipment for the years 2017 and 2016 respectively.
Santos Limited
The net cash flows provided by operating activities for Santos Limited in the years 2018,
2017 and 2016 were AU$ 1,578, AU$ 1,248 and AU$ 840 respectively. On the other hand, cash
flows used in investing (capital expenditures) activities amounted to AU $2,373 IN 2018, AU $
534 in 2017 and AU$ 205 in 2016. From the figures, it is evident that the cash flows generated
by the company from Operating activities were enough to be used for capital expenditures in
2016 and 2017 but were not enough in 2018 as demonstrated above.
(e) Assessing Whether the Cash flow from Operations Was Enough to Cover for Both
Capital Expenditures and the Dividends Payments Made by the Firms.

Corporate Accounting-Analysis of Company Cash flows 7
Looking at the cash flows generated/ used in operations, it can be deduced that for some
firms, the cash flows generated from continuing operations were enough to cover for both capital
expenditures and the dividends requirement made by the firms while for some firms, there was
cash outflow utilized in operations meaning funds used in capital expenditures and payment of
dividends must have been raised by financing or investing activities.
Funtastic Limited
The net cash outflows used in operating activities for Funtanstic Limited were AU
$10,182 in 2018, AU$ 2,750 in 2017 and AU$ 7,329 in 2016. In this case, it is evident that the
firm never raised any funds from operations but instead funds were used in operations. On the
other hand, AU$ 298 in 2018, AU$ 989 in 2017 and AU$ 558 in 2016 were used in investing
activities (Capital expenditures). Making reference to the cash flow statements for Funtastic
limited for the financial years 2018, 2017 and 2016, no dividend was paid.
BHP Limited
Cash flows generated from operating activities for BHP limited in the years 2018, 2017
and 2016 were AU $ 22,949, AU$ 18, 612 and AU$ 12,091 respectively. On the other hand, AU
$ 4,979, AU$ 3,697 and AU$ 5,707 was used to purchase property, plant and equipment. Still on
payments, BHP Limited paid AU$ 5,220 in 2018 as dividends to majority shareholders. AU$
1,582 was also used to pay dividends to non-controlling interests. From this analysis, it is evident

Corporate Accounting-Analysis of Company Cash flows 8
the cash flows generated by BHP limited from operating activities were enough to gather for
both payment of dividends and Capital Expenditures.
Santos Limited
Santos Limited was able to generate US$ 1,578 in 2018, US$ 1,248 in 2017 and
US$ 840 in 2016. The cash generated from operations was used to partly pay for capital
expenditures (investing activities) which amounted to US$ 2,273 in 2018, US$ 534 in 2017 and
US $ 205 in n2016. The company also paid dividends in 2018 and 2016 amounting to US $ 73
and US$ 43 respectively. It is evident that the cash generated from operations was not enough to
gather for payment of both the dividends and capital expenditures (investing activities) as
described by the figures above.
(f) Investments Viability of the Firms.
Funtastic Limited never realized any cash inflow from operating activities, instead AU$
10,182, AU$ -2,750 and AU$ 7,329 were used in operating activities for the years 2018, 2017
and 2016 respectively. From a look of the cash flows statement of the firm, the firm AU$ was
able to raise AU$ 10,547, AU$ 3,647 and AU$ 7,568 from financing activities in the years'
2018, 2017 and 2016 respectively. This is likely to be the source of funds used to pay for capital
expenditures and or dividends.
BHP Limited

Corporate Accounting-Analysis of Company Cash flows 9
BHP Limited was able to raise a substantial amount of cash flows from its operating
activities. The excess funds derived after payment of suppliers and employee salaries for all the
periods were used in investing activities and financing activities. Dividends were also paid after
settlement of financing and investing activities.
Santos Limited
The net cash flows generated by Santos limited after payment of suppliers and employees was
significantly smaller to Cather for both payments of dividends and for financing activities. There
was, therefore, no excess in terms of cash flow from operations. Funds provided by financing
activities might have been used in the payment of investing activities (capital expenditures) and
settlement of dividends.
g) Assessing whether BHP used working capital as a source of cash.
Looking at the cash flow statement for BHP Limited, it is evident that BHP was able to
generate enough cash flows from its operations to be able to pay for suppliers, employees,
dividends and investment and financing activities as shown in the table below.
2018 AU$000
2017
AU$000 2016 AU$000
Net cash outflow from operating activities 22,949 18,612 12,091
Net operating cash flows 18,461 16,804 10,625
Net cash outflow from investing activities -5,921 -4,161 -7,245
Net cash inflow/outflow from financing activities -10,891.00 -9,133.00 284
Excess Cash flows (After Financing & Investing activities) 1,649.00 3,510.00 3,664.00

Corporate Accounting-Analysis of Company Cash flows 10
h) Major items that Affect Cash Flows
Cash flows for the three firms are mainly affected by the below cash flow items.
i. Investing activities
ii. Financing activities
iii. Payments to suppliers and employees
iv. Payment of dividends
v. Purchase of property plant and equipment.(Capital expenditure)
(i) The trend in Capital Expenditures
Capital expenditures for Funtastic limited have been reducing from the year 2016 to
2017. In 2018, there was minimal capital expenditure. The net cash outflow from investing
activities in 2016 was AU$ 558, in 2017 it dropped to AU$ 989 and finally to AU$ 298 in 2018.
Capital expenditures for BHP have aloe been varying, purchase of property plant and
equipment was US$ 5,707 in 2016, before dropping to US$ 3,697 in 2017 and rising slightly to
US$ 4,979 in 2018.
For Santos limited, Capital expenditures have also been varying 2016 and 2018 as shown
in the table below.
Change in Capital Expenditures for Santos Limited
2018 US$M 2017 US$M 2016 US$M

Corporate Accounting-Analysis of Company Cash flows 11
Exploration and evaluation assets - 66.00 146.00 - 128.00
Oil and gas assets - 490.00 - 483.00 - 500.00
land, buildings, plant and equipment - 10.00 - 5.00 - 4.00
Acquisitions of oil and gas assets - 10.00 - 49.00 - 18.00
- 576.00 - 391.00 - 650.00
(j). The trend in Dividends Payment
Dividends payment for Funtastic has been varying from 2016 to 2018. In 2016, the firm paid
AU$ 4,130 as dividends before reducing to AU$ 2,921 in 2017. In 2018, the firm paid dividends
amounting to AU$ 5,220.
For BHP, dividends payment has been increasing over the years. In 2016, the bank paid US$
62 while US$ 575 was paid in 2017 and lastly US$ 1,582 in 2018.
Santos Limited paid US$ 43 in 2016 as dividends and increased it to US $73 in 2018. No
dividends were paid in 2017.
(k) Trends in Net Borrowing
In terms of borrowing, the three firms have been active.
For Santos, the trend in net borrowing has been variable as shown in the Table below.
Table of Net Borrowings for Santos Limited 2018 AU$000 2017 AU$000 2016 AU$000
Proceeds from borrowing 2,630.00 7,457.00

Corporate Accounting-Analysis of Company Cash flows 12
3,647.00
Payments of short- and long-term debt ( Commercial bills) - 1,000.00
Interest and other costs of finance paid
-
1,917.00
-
3,559.00 - 3,794.00
713.00 88.00 2,663.00
For BHP Limited, net borrowings have been increasing from 2016 to 2018 as shown in the
table below.
Table of Net Borrowings for BHP Limited 2018 US$M 2017 US$M 2016 US$M
Proceeds from interest bearing liabilities 528.00 1,577.00 7,239.00
Settlements)/proceeds from debt related instruments - 218.00 36.00 156.00
Interest Paid - 1,177.00 - 1,148.00 - 829.00
Settlement of cash management related instruments - 292.00 - 140.00 -
Repayment of interest bearing liabilities - 4,188.00 - 7,114.00 - 2,781.00
Net Borrowing - 5,347.00 - 6,789.00 3,785.00
Net borrowings for Santos limited have been variable between the years 2016 and 2018 as shown
in the table below,
Table of Net Borrowings for Santos
Limited
2018
US$M 2017 US$M 2016 US$M
Drawdown of borrowings 1193 783 -
Repayment of borrowings -220 -2442 -147
Borrowing costs paid -194 -254 -226
Net Borrowing 779 -1913 -373
(l) Trends in Working Capital Accounts for BHP Limited

Corporate Accounting-Analysis of Company Cash flows 13
Working capital requirement is found by subtracting the current liabilities from the
current assets. The working capital account for BHP Limited has been changing over the years.
The net-working capital in 2016 was at US $ 636 before dropping to US$ 92 in 2017 and further
to US$ 125 in 2018 as shown in the table below.
Changes in assets and Liabilities for BHP
Limited 2018 US$M 2017 US$M 2016 US$M
Trade and other receivable - 662.00 267.00 1,387.00
Inventories - 182.00 - 687.00 521.00
Trade and other payables 719.00 512.00 - 1,272.00
- 125.00 92.00 636.00
2. Evaluation of the Financial Strength of the three firms.
Based on the analysis and pieces of evidence presented in the statement of cash flows for
the companies, we can be able to evaluate the financial strength of each of the three firms basing
judgment on the cash flows used/generated from operating, investing and financing activities. A
detailed examination from each of the companies shows the following financial strength for the
individual firms.
Funtastic Limited
The best ratio that can be used to assess the financial strength of Funtastic Limited is the
cash generating power ration. The formula for finding the ratio is given by dividing the cash flow
from operations with the sum of cash from investing activities and cash from investing activities.

Corporate Accounting-Analysis of Company Cash flows 14
Cash Generating Power Ratio = (CFO/ Cash from Investing Inflows + Cash from Financing
Inflows)
Table to show the Financial Strength of Funtastic Limited
2018 AU$000 2017 AU$000 2016 AU$000
Net cash outflow from operating activities (10,182) (2,750) (7,329)
Net cash outflow from investing activities (298) (989) (558)
Net cash inflow from financing activities 10,547 3,647 7,568
Sum of cash from investing activities and
cash from investing activities
10,249.00 2,658.00 7,010.00
Cash Generating Power Ratio -0.99 - -1.03 -1.05
From the analysis at the table above, the cash generating power ratio in 2018 was -0.99.
The same ratio was -1.03 in 2017 and -1.05 in 2016. Since the ratio is negative, it is evident that
the company is financially weak as it seems to be depending, mainly on financing and investing
activities for cash flow.
BHP Limited
Table to show the Financial Strength of BHP limited
2018 AU$000 2017 AU$000 2016 AU$000
Net cash outflow from operating activities 22,949 18,612 12,091
Net operating cash flows 18,461 16,804 10,625
Net cash outflow from investing activities -5,921 -4,161 -7,245
Net cash inflow/outflow from financing activities -10,891.00 -9,133.00 284.00
Sum of cash from investing activities and cash from -16,812.00 -13,294.00 -6,961.00

Corporate Accounting-Analysis of Company Cash flows 15
investing activities
Cash Generating Power Ratio -1.10 -1.26 -1.53
As for BHP, the firm is greatly involved with investing and financing activities. Since
there is a substantial amount of cash flows from financing and investing activities for all the
years, it can be concluded that the strength of the firm will be begged on the returns brought
about by financing and investing activities. BHP can, therefore, be financially strong if there will
be a high return on investment in the subsequent years.
Santos Limited
Table to show the Financial Strength of Santos limited
2018
AU$000 2017 AU$000 2016 AU$000
Net cash provided by operating activities 1,578.00 1,248.00 1,570.00
Net cash used in investing activities - 2,373.00 - 534.00 - 205.00
Net cash provided by/(used in) financing activities 890.00 - 1,518.00 543.00
Sum of cash from investing activities and cash from investing
activities - 1,483.00 - 2,052.00 338.00
Cash Generating Power Ratio - 1.06 - 0.61 4.64
For Santos Limited, the firm was able to generate some small amounts of cash flows to
be used in financing activities in the years 2018 and 2017. For the financial period ended 2016,
the cash generating power ratio for the bank was 4.64 meaning the bank was very strong in terms
of cash flow. However, in 2017, the ratio reduced to -0.61 and -1.06 respectively. The Future

Corporate Accounting-Analysis of Company Cash flows 16
financial strength of the firm is therefore pegged on the returns that the firm will get from
investing activities.