The panel below reports cash flows and earnings for Wal-Mart from 1988 to 1996 (in millions of dollars, except per share numbers):
| |
1988 |
1989 |
1990 |
1991 |
1992 |
1993 |
1994 |
1995 |
1996 |
| Cash from operations |
536 |
828 |
968 |
1,422 |
1,553 |
1,540 |
2,573 |
3,410 |
2,993 |
| Cash investments |
627 |
541 |
894 |
1,526 |
2,150 |
3,506 |
4,486 |
3,792 |
3,332 |
| Free cash flow |
(91) |
287 |
74 |
(104) |
(597) |
(1,966) |
(1,913) |
(382) |
(339) |
| Net Income |
628 |
837 |
1,076 |
1,291 |
1,608 |
1,995 |
2,333 |
2,681 |
2,740 |
| EPS |
0.28 |
0.37 |
0.48 |
0.57 |
0.70 |
0.87 |
1.02 |
1.17 |
1.19 |
What can you tell from the EPS data? Perform a horizontal analysis to support your view.
What is the definition of free cash flow? How do we use free cash flow in financial statement analysis?
Why would Wal-Mart have such negative free cash flows?
What explains the difference between Wal-Mart's cash flows and earnings? Any implications for Wal-Mart's financial position and performance?