Corporate Balance Sheet

Exhibit 2

 Investments
Investments of nestle

Corporate Profit and Loss Account

Example 2

Notes to the Accounts and Significant Accounting Policies

Understanding and Constructing Corporate Cash Flow Statement

Other Financial Reports: I Auditors Report and Directors Report

AR and DR are made compulsory by Indian Companies Act,1956
Sec 227 {AR}
Report by auditor to inform the members that he has examined the balance sheet, Profit and loss and other supplements

Sec 217 {DR}

A report by the board of directors to be attached with every Balance Sheet laid before a companys general meeting.

Corporate Governance Report

CG report Mandatory by SEBI for listed companies.
To report the effectiveness with which the mgmt is discharging its responsibility towards attaining this objective.

Development
Cadbury commmittee(1992)Sarbbanes Oxley Act(1999)

Corporate Governance

 The CII Initiative

Protecting SSI Transparency Harmonisation with International stds. High level of public confidence

The first committee on CG in India

Kumar Mangalam Birla Committee on Corporate Governance

Analysis of Cash Flow Statement and Management Discussion and Analysis Report

 Analysis of Cash Flow Statement

A. Operating Activities
1. 2. The primary source of cash for Intel is operating activities. a. This typically indicates a strong cash position. In 1999 and 1997 Intel had a net cash inflow in respect of net current liabilities/assets. a. This typically indicates an efficient management of working capital. For property, plant and equipment Intel had a net cash outflow all the three years. a. This indicates Intel is purchasing more fixed assets. b. In general, this is an indication of an expanding business. c. Fixed assets are income-producing assets, which are expected to produce higher future revenues.

B. Investing Activities
3.

4.

5.

6.

Intel was very aggressive in acquiring running businesses during 1999. a. Read with fixed assets, it indicates that Intels future profits are expected to grow faster. Intel sold more investments than it purchased in 1999. a. In general it means that it has got more money for investing in fixed assets or other better investment opportunities. b. In either case, it indicates that Intels future profits are expected to grow faster. For investing activities Intel had a net cash outflow all the three years. a. It indicates a favourable cash position. Intel had a net cash outflow on account of equity all the three years. a. It indicates that Intel is purchasing more of its own common stock. b. It has the effect of increasing Intels EPS and RONW and consequently higher valuation in the capital market. c. It means Intel may, when in need, raise more capital from the capital market at a good premium and thus strengthen its financial position further.

C. Financing Activities
7.

Intel borrowed more short-term debt than it repaid during 1999. But based on its high cash balance it is not clear why it borrowed a negligible amount. Intel borrowed more long-term debt than it borrowed during 1999 and 1998. But based on its high cash balance it is not clear why it borrowed negligible amounts. Intels dividend payout has been increasing despite buying back its own equity. During 1999, it paid dividend almost equal to the aggregate dividend of 1997 and 1998.
This typically shows the managements ability to serve a smaller capital and its confidence in generating enough cash flows in future to be able to pay higher dividend year after year.

Intels financing activities reflect a favourable cash position.

D. Quality of Cash Position

12. The information provided by the cash flow statements of Intel appears to indicate a high quality of cash position. The reasons are simple and more than clear. It has been generating cashfrom operating activities and utilising this money in expanding its business and buying back its own equity with the surplus cash. Among other reasons, equity is normally bought back when the market price of the share is less than its NAV, due to many factors, and thus the company strengthens its financial position through this route. Companies in the US make money by trading in their own equity as well since they are allowed to carry the bought back shares as treasury stock, unlike in India.

E. Ability to Generate Positive Cash Flows from Operations in Future

13. Intel has been generating cash from operations consistently. Though there was a dip down during 1998, it was insignificant in view of the size of the company. It however bounced back very smartly in 1999. Information provided by its cash flow statements clearly establishes the companys ability to generate positive cash flows from operations in future. It appears from the information that INTELs debts are very insignificant and therefore it is in a highly comfortable position to meet its obligations towards its lenders as well as shareholders.