X Activities: Operating Activities

Y Activities: Investing Activities

Z Activities: Financing Activities

1- Analyze the operating cash flow trend over the three years (in amounts and
percentages).

We can see that we have a decrease in the amount of operating cash flow from 5270 (2017) to
4,000 (2018) to 144 (2019), and we see a decrease in common size percentage of total cash
inflow form 55.01% (2017) to 47.98% (2018) to 3.04% (2019)
The percentage of Operating Cash flow decrease was 24.09 % (2007-2008) and 96.4 % (2008-
2009)
We can see that the company increased its inventory sharply in 2018 and 2019 without
proportional increasing in the profitability (Increase of sales). Net Income was decreasing from
2017 to 2019. They might fail to sell new purchased goods or fail to expect the real demand of
the goods or be under economic conditions that lead to this loss.
In 2019 the company paid the cost of the purchased goods in 2008 which lead to another
decrease in the operating cash flow.

How does it compare to net income in each year (include differences in

amounts)?

Net income was fewer than operating cash flow by: 1,030 in (2017) and by (1,187) in 2018 while
it was greater than operating cash flow by 1,485 in (2019).
The common size percentage on net come to total cash inflow was:

2019 2018 2017

34.30 33.74 44.25
Net Income
% % %
47.98 55.01
Operating Cash flow 3.04%
% %

From where the difference (between operating cash flow and net income) comes
in each year (use $100 thousand as a threshold for your analysis – include in
your analysis whether the item has increased or decreased during the year)?
In 2017: Net Income < Operating Cash flow
- The decrease in accounts receivables by 426.
- The decrease in Inventory by 231.
 - The increase in accounts payable and accrued liabilities by 158.
In 2018: Net Income < Operating Cash flow
- The decrease in accounts receivables by 187.
- We had a big increase in Inventory by 1,255 which should have led to decrease in
operating cash flow, but most this purchased good was not paid in cash but on credit
which increases account payable by 1,515, so it led to increase operating cash flow.
In 2019: Net Income > Operating Cash flow
- The Increase in Inventory by 800.
- The increase in prepaid expenses by 203.
- The decrease in accounts payable and accrued liabilities by 1,525

2- What are the main non-operating sources and uses of cash over the past three
years?
Main non-operating source of Cash was long-term debt and short time securities.
Main non-operating uses of Cash were investments in PP&E, payments for long-term debt,
repurchasing stock (Treasury stock) and the dividends.

Specifically analyze where management has generated or used cash under non-
operating activities in each year (use $100 thousand as a threshold for your
analysis – include in your analysis of each year the amount of cash used or
generated and identify the cause and the non-operating activity of each amount).
In 2017:
- Management generate 1,482 of cash form Long term-debt which could be a bank loan.
- Management generate net 495 of cash form short time securities from buy and selling
these securities.
- Management use 1,105 to invest in PP&E which could be purchasing a new plant or
maintaining existing ones.
- Management use 320 as a payment of the company’s long term debts.
- Management use 2,223 to repurchase stocks from shareholders.
- Management use 1,133 as distributed dividends to the share holders.
In 2018:
- Management generate net 1,167 of cash form short time securities through buy and
selling these securities.
- Management use 1,950 to invest in PP&E which could be purchasing a new plant or
maintaining existing ones.
- Management use 300 as a payment of the company’s long term debts.
- Management use 1,000 to repurchase stocks from shareholders.
- Management use 1,900 as distributed dividends to the share holders.
In 2019:
- Management use net 865 of cash form short time securities through buy and selling these
securities.
- Management use 2,419 to invest in PP&E which could be purchasing a new plant or
maintaining existing ones.
- Management use 280 as a payment of the company’s long term debts.
- Management use 2,286 to repurchase stocks from shareholders.
- Management use 1,332 as distributed dividends to the share holders.

3- Analyze the changes in cash and cash equivalents over the three years (in
amounts and percentages).
We can see that we have a non-important increase in cash and cash equivalents from 8,616
(2017) to 8,648 (2018) (increase by (0.37%). Although the company increased its inventory
markedly, it purchased on account which did not affect cash.
while we see a sharp decrease to 1,518 (2019) (decrease by 82.46%), because the company paid
its liability that incurred in 2018.
The increasing investing portion in PP&E could be also another reason for that decrease in cash.

What actions (at least two) would you suggest for management to take in 2020 to
avoid a substantial decrease in cash and cash equivalents?
1- Increasing the profitability through enhancing sales and trying to eliminate unpredictable
and unnecessary expenses.
2- If the failed, they would try to reduce inventory and receivables until they can reach a
steady cash flow that can cover their obligations. It could be risky and on the expenses of
services to customers.
3- Reducing its investment in the PP&E.
4- Stopping repurchasing stock. They can issue new stocks or sell some stocks from the
Treasury stock.

What are the free cash flows of years 2017, 2018 and 2019? Show all
calculations.
Free cash flow = Cash flow from operations – Capital expenditures – Dividends
In 2017 = 5,270 – 1,105 + 13 – 1133 = 3,045
In 2018 = 4,000 – 1,950 + 3 – 1,900 = 153
In 2019 = 144 – 2,419 + 5 – 1,332 = -3,602

Analyze each and every year’s free cash flows.

In 2017, the company was at good position with its available cash.
In 2018, this availability of free cash flow decreases due to the decrease in the operating cash
flow and the increase in PP&E and dividends.
In 2019, the sharp decrease in operating cash flow lead the company to the be under high risk
due to the reduced cash availability for the company to repay creditors or pay dividends and
interest to investors.