The cash flow statements for retailing giant BigBox, Inc. spanning the period 2013dash–2016 are found here:...

The cash flow statements for retailing giant BigBox, Inc. spanning the period

2013dash–2016

are found here:

. Answer the following questions using the information found in these statements:

a. Did BigBox generate positive cash flow from its operations?

b. How much did BigBox invest in new capital expenditures over the period?

c. Describe BigBox's sources of financing in the financial markets over the period.

d. Based solely on the cash flow statements for 2013 through 2016, write a brief narrative that describes the major activities of BigBox's management team over the period.

(US$_millions) 12/31/2016 12/31/2015 12/31/2014 12/31/2013
Net_Income $13,000 $12,000 $11,000 $10,000
Depreciation_Expense 6,500 6,300 5,000 4,000
Changes_in_Working_Capital 1,200 2,300 2,400 1,000
Cash_from_Operating_Activities $20,700 $20,600 $18,400 $15,000
Capital_Expenditures $(16,000) $(14,500) $(14,000) $(12,300)
Cash_from_Investing_Activities $(16,000) $(14,500) $(14,000) $(12,300)
Interest_and_Financing_Cash_Flow_Items $(350) $(250) $(350) $100
Total_Cash_Dividends_Paid (3,600) (2,800) (2,500) (2,200)
Issuance_(Retirement)_of_Stock (8,000) (1,500) (3,600) (4,500)
Issuance_(Retirement)_of_Debt 1,500 (100) 4,000 4,100
Cash_From_Financing_Activities $(10,450) $(4,650) $(2,450) $(2,500)
Net_Change_in_Cash $(5,750) $1,450 $1,950 $200

Solutions

Expert Solution

Answer a:

Yes,

BigBox has generated positive cash flows from its operations in all 4 years. The cash flow from operation shows a positive trend.

Answer b:

BigBox has invested in new capital expenditures every year over the period.

Total new capital expenditures over the period = 16000 + 14500 + 14000 + 12300 = $56,800

Answer c:

Sources of financing in the financial markets over the period is Debt. Although equity is also source of finance, but during the period the company has retired stocks and no new shares were issued.

Answer d:

Major activities of Big Box's management team over the period:

1. Net income has been positive all 4 years and cash flow from operations show a positive trend.

2. Big box is consistently investing in new capital expenditures to support growth. Capex also shows a positive trend.

3. In the years 2013, 2014 and 2015 Big Box has taken new debt /enhanced existing debt.

4. Big Box has been retiring its stock in all 4 years with maximum stock retired in 2016.

5. Big Box has been consistently paying dividends during the period. Dividend payout ratio is also increasing steadily.

jeff jeffy answered 1 year ago

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