Interpreting Financial Statements: Cash Flow Effects
United States Surgical Corporation (USSC) provided the following consolidated statement of cash flows, as abbreviated:
|
Year Ended December 31, |
||
|
1993 |
1992 |
|
|
Cash flows from operating activities: |
||
|
Cash received from customers |
$1,103,300 |
$1,087,700 |
|
Cash paid to suppliers and employees |
(941,200) |
(905,900) |
|
Interest paid |
(18,300) |
(15,600) |
|
Income taxes paid |
(12,800) |
(18,400) |
|
Net cash provided by operating activities |
131,000 |
147,800 |
|
Cash flows from investing activities: |
||
|
Property, plant, and equipment purchases |
(216,400) |
(270,700) |
|
Other asset purchases |
(31,100) |
(31,100) |
|
Net cash used in investing activities |
(247,500) |
(301,800) |
|
Cash flows from financing activities: |
||
|
Long term debt borrowings |
2,614,400 |
1,840,800 |
|
Long term debt repayments |
(2,495,900) |
(1,696,000) |
|
Common stock issued |
8,100 |
35,200 |
|
Dividends paid |
(13,700) |
(16,400) |
|
Repurchases of common stock |
— |
(16,100) |
|
Net cash provided by financing activities |
112,900 |
147,500 |
|
Net decrease in cash |
$ (3,600) |
$ (6,500) |
Required
a. Identify and discuss any unfamiliar terms or unusual treatments in USSC’s cash flow statement.
b. Discuss the differences between net cash provided by operating activities and cash received from customers.
c. From the data above, evaluate USSC’s overall cash flows or cash balances at the end of each year.
d. What part of the balance sheet or cash flow statement would help you better evaluate USSC’s overall cash flows or cash balances at the end of either year? Why?
e. Given the following additional balance sheet and income statement data:
|
1993 |
1992 |
|
|
Net sales |
$1,037,200 |
$1,197,200 |
|
Net income (loss) |
(138,700) |
138,900 |
|
Interest expense |
18,500 |
14,700 |
|
Income taxes |
1,300 |
54,000 |
|
Total assets |
1,170,500 |
1,168,000 |
|
Long term debt |
137,500 |
110,700 |
|
Stockholders’ equity |
443,900 |
590,000 |
Calculate the following ratios, for each year:
1. cash return on assets (1993 only)
2. quality of sales
3. quality of income
4. cash interest coverage
f. Based on these ratios, evaluate USSC’s performance. In what areas do the cash flow ratios represent positive or negative performances?
g. What additional information would be useful in evaluating USSC’s performance?