SEC 10K Project: Statement of Cash Flow
This activity is designed to help you prepare your paper and is to be written in proper APA format. Before providing your write-up, find the cash flow statement for your chosen company as well as the cash flow for a competitor company. Compare the cash flow for both companies. And compare/comment on each. Attach the cash flow statements as a Word document, to your posting.
Provide a written analysis of the cash flow statements. Please focus on the elements of the cash flow statement and compare each major section (Cash Flow from Operating Activities, Investing Activities and Financing Activities). The analysis is not to compare the volume of cash flow. Many companies that are competitors of each other are very different in size. Concentrate on how each company is obtaining its cash and how they are using that cash and note similarities and differences. Compare year-over-year numbers and note and research any significant trends or differences from year to year.
A reminder - this exercise is designed to help you write your SEC 10-K paper. Please respond to this conference as if you were submitting a section of your paper, using proper APA formatting (with in-text citations and reference list), headers, etc. Please do not respond in a conversational and casual style (no writing in the first person, using slang terminology, etc.)
Here are some pointers to help you write this section of your paper:
The numbers in the Operating Activities section relating to current assets and liabilities are not balances. These are merely the changes in these accounts from one year to the next. Because this section starts with accrual basis net income, it is necessary to convert this to cash basis in order to compute the cash flow from operating activities. For example, if accounts receivable increased from one year to the next, then that means that there was net income recognized that was not received as cash, so increases in accounts receivable are subtracted from accrual basis net income. Other adjustments in this section are for non-cash related expenses or differences in accrual versus cash basis expenses.
When comparing your company's cash flow with another's, focus more on the sources and uses of cash for each, as well as notable trends from year to year. It is ok to mention the size of one company versus the other, but this should not be the main driver of your analysis.
"Negative" numbers in the Finance and Investing sections do not represent losses. Gains and losses are reported on the income statement. Cash flow statements deal with the sources and uses of cash. Negative numbers in these sections indicate that the company used cash for these activities and positive numbers means that they received cash from these activities.
Organize your write up by the major sections of the cash flow statement. This will make your paper flow better and make it easier for the reader to relate your analysis to the statements themselves.
Use the details provided in the financial statements, read the notes and review other details provided in the 10-K (and you can use other sources as well) in order to gain more insight in order to better explain the numbers. Do not limit your analysis to just reviewing the numbers on the statement and trying to guess what happened. Just stating what the numbers are and whether they went up or down is not an analysis. An analysis explains the numbers and draws conclusions. You are expected to include some level of analysis of the numbers in your paper.
Make sure your paper is in APA format with in-text citations and a reference list.