Accounting: What the Numbers Mean 9th Edition by Wayne W McManus, Daniel F Viele, David H Marshall

Exercise 87

Statement of cash flows analysis Refer to the statement of cash flows in the annual report you have obtained either as a result of completing Exercise 1.1 or otherwise.

Required:

a. Which method, direct or indirect, is used in the statement?

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b. List the principal sources and uses of cash for this firm.

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c. Evaluate the change in cash. Has the firm generated most of its cash requirements from operations, or has it had to borrow extensively? Has the firm’s uses of cash been balanced between investment and dividends?

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d. Has the cash balance been increasing or decreasing? What seem to be the implications of this pattern for dividends?

Step 1 of 4

Analysis of Cash flow statement

Answers vary depending on the firm being analyzed, but for instance we took the example of Intel Corporation presented in the textbook. Thus, data are extracted from page 689 and of this textbook as referring annual report of Intel Corporation.

Finding the statement of cash flow method used by the company:

Based on the example of Intel Corporation’s, the presented cash flow statement is prepared according to indirect method.