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AFA 300 Chapter Notes - Chapter 5: Cash Flow, Interest Expense

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School
Ryerson University
Department
Accounting
Course
AFA 300
Professor
Liu Guoping

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Document Summary

Operating activities: principle revenue producing activities of the enterprise and the related expenditures. Investing activities: relate to long-term capital assets and long-term investments: acquisition and disposal of pp&e, intangible assets. Financing activities: relate to borrowings and contributed o/e. Prepare scf: examine changes in each account listed on the sfp. Is the change due to cash: example: decrease in a/r- implies cash increased more than sales for the period. Direct presentation: revenues and expenses are adjusted to a cash basis of reporting and shown directly in deriving cash provided by operations: preferred under ifrs and aspe. Indirect presentation: operating activities begins with net earnings, and all inter-period and accruals are reversed out of net income to derive the cash from operations: two steps- separately shows adjustments for changes in working capital items. Offsetting allowed only when cash receipts and payments are made on behalf of a customer.

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Related Questions

A fire destroyed your firm’s ending balance sheet and income statement after the year-end
but before the financial statements are released. However, you have been successful in obtaining the
numbers for the beginning balance sheet and the statement of cash flows, which are provided to you and
your team members in Excel format. Fields representing the missing balance sheet and income statement
are End of year2 in the Excel sheet

CONSOLIDATED BALANCE SHEETS (USD $) End of year 2 End of year 1
In Thousands, unless otherwise specified
Current assets:
Cash and cash equivalents 　 598
Receivables, net 　 230
Inventories, net 　 2309
Other current assets 　 47
Total current assets 　 3184
Property and equipment, net of accumulated depreciation 　 1292
Assets held for sale 　 1
Goodwill 　 76
Intangible assets, net 　 29
Other assets, net 　 32
Assets, Total 　 4614
Current liabilities: 　 0
Current portion of long-term debt 　 0
Accounts payable 　 2030
Accrued expenses 　 380
Other current liabilities 　 150
Total current liabilities 　 2560
Long-term debt 　 604
Other long-term liabilities 　 239
Commitments and Contingencies 　 0
Stockholders Equity Attributable to Parent [Abstract] 　 0
Preferred stock, nonvoting, $00001 par value 　 0
Common stock, voting, $00001 par value 　 0
Additional paid-in capital 　 520
Treasury stock, at cost 　 -27
Accumulated other comprehensive income (loss) 　 3
Retained earnings 　 715
Total stockholders equity 　 1210
Liabilities and Stockholders Equity, Total 　 4613
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) 12 Months Ended
In Thousands, except Per Share data, unless otherwise specified Year 2
Net sales 　
Cost of sales, including purchasing and warehousing costs 　
Gross profit 　
Selling, general and administrative expenses 　
Operating income 　
Interest expense 　
Other income, net 　
Total other, net 　
Income before provision for income taxes 　
Provision for income taxes 　
Net income 　
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) 12 Months Ended
In Thousands, unless otherwise specified Year 2
Cash flows from operating activities:
Net income $392
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 208
Share-based compensation 13
Loss on property and equipment, net 1
Other 2
Provision for deferred income taxes -2
Excess tax benefit from share-based compensation -16
Increase Decrease in Operating Capital
Receivables, net -32
Inventories, net -204
Other assets 11
Accounts payable 113
Accrued expenses 63
Other liabilities -4
Net cash provided by operating activities 545
Cash flows from investing activities:
Purchases of property and equipment -196
Payments to Acquire Businesses, Gross -186
Sale of certain assets of acquired business 19
Proceeds from sales of property and equipment 1
Net cash used in investing activities -362
Cash flows from financing activities:
(Decrease) increase in bank overdrafts -3
Decrease in financed vendor accounts payable 0
Issuance of senior unsecured notes 449
Payment of debt related costs -9
Borrowings under credit facilities 0
Payments on credit facilities 0
Dividends paid -18
Proceeds from the issuance of common stock, primarily exercise of stock options 4
Tax withholdings related to the exercise of stock appreciation rights -22
Excess tax benefit from share-based compensation 16
Repurchase of common stock -81
Contingent payment accrued on acquisitions 5
Other -1
Net cash provided by (used in) financing activities 331
Net increase (decrease) in cash and cash equivalents 514
Cash and cash equivalents, beginning of period 598
Cash and cash equivalents, end of period 1,112
Supplemental cash flow information:
Interest paid 35
Income tax payments 219
Non-cash transactions:
Accrued purchases of property and equipment 21
Retirement of common stock 0
Contingent consideration accrued on acquisitions 0
Changes in other comprehensive income 1
Declared but unpaid cash dividends $4

Perform a vertical and horizontal analysis of Wal-Mart Stores,Inc.’s income statements and balance sheets as of January 31, 2015.In performing this analysis, consider any notable trends or changesthat you observe that may provide useful information concerning itsfinancial condition. Also use as many years’ worth of statements asyou feel necessary.

WAL MART STORESINC
10-K
Statement of CashFlows
(Amounts in millions)
Fiscal Year Ended January 31, 2015 2014 2013 2012
Cash flows from operating activities:
Consolidated net income $17,099 $16,695 $17,756 $16,387
(Income) Loss from discontinuedoperations, net of tax (285) (144) (52) 21
Income from continuing operations 16,814 16,551 17,704 16,408
Adjustments to reconcileincome from continuing operations to net cash provided by operatingactivities
Depreciation and amortization 9,173 8,870 8,478 8,106
Deferred income taxes (503) (279) (133) 1,050
Other operating activities 785 938 602 468
Changes in certain assets and liabilities,net of effects of acquisitions:
Increase in accounts receivable (569) (566) (614) (796)
Increase in inventories (1,229) (1,667) (2,759) (3,727)
Increase in accounts payable 2,678 531 1,061 2,687
Increase in accrued liabilities 1,249 103 271 30
(Decrease) Increase in accrued incometaxes 166 (1,224) 981 29
Net cash provided by operatingactivities 28,564 23,257 25,591 24,255
Cash flows from investing activities:
Payments for property and equipment (12,174) (13,115) (12,898) (13,510)
Proceeds from disposal of property andequipment 570 727 532 580
Proceeds from disposal of certainoperations 671 0 0 0
Other investing activities (192) (138) (271) (3,679)
Net cash used in investingactivities (11,125) (12,526) (12,637) (16,609)
Cash flows from financing activities:
Net change in short-term borrowings (6,288) 911 2,754 3,019
Proceeds from issuance of long-termdebt 5,174 7,072 211 5,050
Payment of long-term debt (3,904) (4,968) (1,478) (4,584)
Dividends paid (6,185) (6,139) (5,361) (5,048)
Purchase of Company stock (1,015) (6,683) (7,600) (6,298)
Dividends paid to noncontrollinginterest (600) (426) (282) (526)
Purchase of noncontrolling interest (1,844) (296) (132) 0
Other financing activities (409) (260) (58) (71)
Net cash used in financingactivities (15,071) (10,789) (11,946) (8,458)
Effect of exchange rates on cash (514) (442) 223 (33)
Net (decrease) increase in cash and cashequivalents 1,854 (500) 1,231 (845)
Cash and cash equivalents at beginning ofyear 7,281 7,781 6,550 7,395
Cash and cash equivalents at endof year $9,135 $7,281 $7,781 $6,550
Supplemental disclosure of cash flowinformation
Income tax paid 8,169 8,641 7,304 5,889
Interest paid 2,433 2,362 2,262 2,346

Assess Wal-Mart, Stores Inc. concerning liquidity, solvency,profitability, and stock performance as of January 31, 2015. Foreach area, you should calculate the ratios we discussed in classand provide an analysis of the ratios calculated. I includehistorical stock price information and outstanding common shareinformation below.

Fiscal Year Ended

1/31/2015

1/31/2014

1/31/2013

1/31/2012

Adjusted Closing Price

$83.94

$71.97

$65.79

$56.32

Common Shares Outstanding (millions)

3,228

3,233

3,314

3,418

WAL MART STORES INC
10-K
Statement of CashFlows
(Amounts in millions)
Fiscal Year Ended January 31, 2015 2014 2013 2012
Cash flows from operating activities:
Consolidated net income $17,099 $16,695 $17,756 $16,387
(Income) Loss from discontinuedoperations, net of tax (285) (144) (52) 21
Income from continuing operations 16,814 16,551 17,704 16,408
Adjustments to reconcileincome from continuing operations to net cash provided by operatingactivities
Depreciation and amortization 9,173 8,870 8,478 8,106
Deferred income taxes (503) (279) (133) 1,050
Other operating activities 785 938 602 468
Changes in certain assets and liabilities,net of effects of acquisitions:
Increase in accounts receivable (569) (566) (614) (796)
Increase in inventories (1,229) (1,667) (2,759) (3,727)
Increase in accounts payable 2,678 531 1,061 2,687
Increase in accrued liabilities 1,249 103 271 30
(Decrease) Increase in accrued incometaxes 166 (1,224) 981 29
Net cash provided by operatingactivities 28,564 23,257 25,591 24,255
Cash flows from investing activities:
Payments for property and equipment (12,174) (13,115) (12,898) (13,510)
Proceeds from disposal of property andequipment 570 727 532 580
Proceeds from disposal of certainoperations 671 0 0 0
Other investing activities (192) (138) (271) (3,679)
Net cash used in investingactivities (11,125) (12,526) (12,637) (16,609)
Cash flows from financing activities:
Net change in short-term borrowings (6,288) 911 2,754 3,019
Proceeds from issuance of long-termdebt 5,174 7,072 211 5,050
Payment of long-term debt (3,904) (4,968) (1,478) (4,584)
Dividends paid (6,185) (6,139) (5,361) (5,048)
Purchase of Company stock (1,015) (6,683) (7,600) (6,298)
Dividends paid to noncontrollinginterest (600) (426) (282) (526)
Purchase of noncontrolling interest (1,844) (296) (132) 0
Other financing activities (409) (260) (58) (71)
Net cash used in financingactivities (15,071) (10,789) (11,946) (8,458)
Effect of exchange rates on cash (514) (442) 223 (33)
Net (decrease) increase in cash and cashequivalents 1,854 (500) 1,231 (845)
Cash and cash equivalents at beginning ofyear 7,281 7,781 6,550 7,395
Cash and cash equivalents at endof year $9,135 $7,281 $7,781 $6,550
Supplemental disclosure of cash flowinformation
Income tax paid 8,169 8,641 7,304 5,889
Interest paid 2,433 2,362 2,262 2,346