Alpha Corporation
1991
1990
1989
Major sources of cash
Disposal of depreciable and other assets, decrease in accounts receivable
Disposal of depreciable and other assets, sale of discontinued operations, decrease in inventory
ST debt and LT debt
Major uses of cash
Increase in accounts payable, capex, payment of LT debt
Capex, decrease in ST debt, payment of LT debt
Capex, payment of LT debt
CFO > NI?
Yes
Yes
Yes
Major reasons for difference between CFO and NI
Operating loss, depreciation, decrease in accounts receivable
Restructuring and unusual items, gain from sale of assets, depreciation
Depreciation, restructuring and other unusual items
Is CFO > Capex?
No
No
No
Is CFO > Capex + Dividends?
No
No
No
If CFO < Capex + Dividends, how did the company finance Capex + Dividends?
Proceeds from LT debt and sale of assets/discontinued operations
Proceeds from LT debt and sale of assets/discontinued operations
Proceeds of LT debt
Trend in Net Income
Declining until 1990, then a positive change from 1990 to 1989
Trend in CFO
Increasing
Trend in Capex
Declining
Trend in major working capital accounts
Accounts receivable decreasing, accounts payable increasing, working capital overall increasing
Overall assessment of the financial strength of the company
Company is in a mature/bankruptcy phase
They are in the process of disposing of assets and discontinuing operations in order to fund their debt payments and investments in capex – their cash from operations is insufficient to fund these cash outflows
Based on the change in foreign exchange rates, maybe they spun off an unprofitable foreign subsidiary?
Trend in capex also indicates they are investing less in the company, not a good sign
In addition, accounts payable and other current liabilities increases year over year, indicating that they are purchasing more on credit and trying to delay payments
Only good sign is that their loss from continuing operations recovered...