The Boeing Company, USA is the world’s leading aerospace company and the largest manufacturer of commercial jetliners and military aircraft, combined with capabilities in rotorcraft, electronic and defence systems, missiles, satellites, launch vehicles and advanced information and communication systems.
Given hereunder are:
- Select Financial Information, and
- Abridged Cash Flow Statements
of the company for the three years ended December 31, 2005 as extracted from its 2005 and 2004 annual reports.
THE BOEING COMPANY, USA
Select Financial Information |
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(In S millions) |
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As at/For the year ended 31st December. |
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|
2005 |
2004 |
2003 |
Total sales |
54,845 |
52,457 |
50.256 |
Net earnings |
2.572 |
1.872 |
718 |
Property. plant and equipment |
8.420 |
8.443 |
8.597 |
Shareholders” funds |
11,059 |
11.286 |
8.139 |
THE BOEING COMPANY, USA
ABRIDGED STATEMENTS OF CASH FLOWS
In $ millions |
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Year ended 31st December |
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|
2005 |
2004 |
2003 |
Cash flow operating activey |
|
|
|
Net earnings |
2,572 |
1,872 |
718 |
Adjustments for: |
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|
|
|
|
|
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¦ Goodwill impairment |
… |
3 |
913 |
¦ Depreciation |
1,412 |
1,412 |
1.306 |
¦ Amortisation of other acquired intangibles |
91 |
97 |
94 |
¦ Amortisation of miscellaneous expenditure |
23 |
15 |
18 |
¦ Employee benefits and pension provisions |
1,877 |
911 |
309 |
¦ Net loss (gain) on disposal of investments and fixed assets. etc. |
(508) |
(89) |
2 |
¦ Others |
415 |
698 |
495 |
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|
|
|
¦ Accounts receivable |
(592) |
(241) |
357 |
¦ Inventories |
(1,965) |
535 |
191 |
¦ Creditors and other payables |
1.775 |
2,407 |
188 |
¦ Customer advances |
3.562 |
735 |
643 |
¦ Prepaid expenses |
(1.862) |
(4,355) |
(1,728) |
¦ Others |
200 |
(496) |
(730) |
Net cash provided (used) by operating activities |
7.000 |
3,504 |
2,776 |
Cash Flows – investing Activities:
Property, plant and equipment, additions |
(1,4%) |
(978) |
(741) |
Proceeds from disposition of fixed assets |
1.709 |
194 |
186 |
Acquisition of businesses |
(172) |
(34) |
… |
Proceeds from disposition of discontinued operations |
2 |
2,191 |
514 |
Proceeds from disposition of long term investments |
(141) |
(2,819) |
101 |
Net cash provided (used) by Investing activities |
(98) |
(1,446) |
60 |
Cash Flows – Financing Activities: |
|
|
|
New borrowings |
… |
|
2,042 |
Debt repayments |
(1,378) |
(2,208) |
(2,024) |
Employee stock options exercised |
418 |
121 |
18 |
Own equity shares repurchased |
(2.877) |
(752) |
|
Dividends paid |
(820) |
(648) |
(572) |
Net cash provided (used) by financing activities |
(4,657) |
(3,487) |
(536) |
Effect of exchange rate changes on cash and cash equivalents |
(37) |
… |
… |
Net Increase (decrease) In cash and cash equivalents |
2.208 |
(1,429) |
2,300 |
Cash and cash equivalents at beginning of Year |
3.204 |
4,633 |
2,333 |
Cash and cash equivalents at end of year |
5,412 |
3,204 |
4,633 |
Analysis Required
You are required to carry out cash flow analysis for The Boeing Company. Towards this purpose attempt the following requirements:
Req. No. |
Requirement |
Your Choice/Answer |
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Boeing has been sourcing its cash primarily from… |
Op/Inv/Fin activities |
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¦ |
This typically indicates that cash position of Boeing is… |
Strong:Weak |
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On account of non-cash adjustments Boeing had net cash inflows (In)./outflows(Out) of: |
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¦ |
2005 (In 5 millions) |
In-“0ut |
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¦ |
2004 (In $ millions) |
In”Out |
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¦ |
2003 (In 5 millions) |
In/Out |
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¦ |
This typically indicates that Boeing”s earnings are… |
Highly liquid/Not highly liquid |
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Employee benefits and pension provisions have led to high liquidity of Boeing”s earnings…. |
Yes/No |
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Net loss (gain) on disposal of investments. etc. has led to liquidity of Boeing”s earnings during 2005 and 2004…. |
Yes/No |
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In general Boeing has been able to negotiate with its customers and suppliers… |
In its favourThot in its favour |
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In relative terms management of prepaid expenses by Boeing during 2005 has been… |
Better/Worse |
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Which year Boeing had net cash inflows from changes in current assets/liabilities”) |
200512004,2003 |
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Does it mean that during that year Boeing”s management 01 working capital was… |
Effective/Not effective |
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Assuming that discontinued operations represented less profitable business lines. the impact 01 disposition thereof by Boeing during 2004 and 2003, on its cash flows, is expected to be…. |
Positive/Negative |
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Which year Boeing had net Cash inflows from property. plant and equipment… |
200520042003 |
|
¦ |
Does it mean that during that year Boeing had net fixed assets… |
Purchased/Sold |
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¦ |
Boeing”s policy of acquiring running businesses is… |
Aggressive/Not aggressive |
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¦ |
Based on the above factors it appears that Boeing”s sales growth is going to be… |
Normal:Phenomenal |
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Boeing sold more investments, than it purchased, during… |
200512004/2003 |
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The impact on future cash flows of debt repayments by Boeing will be… |
Positive/Negative |
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Repurchase of own equity by Boeing indicates that it has surplus funds which are generating returns lower than its operating returns. |
Agreed/Disagreed |
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The combined effect of repurchase of own equity by Boeing together with stock options exercised by the employees is expected to enable the company pay still higher dividends in future… |
Right/Wrong |
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Boeing”s financing activities reflect a cash position that can be termed as… |
Favourable/Unfavourable |
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Boeing”s cash and cash equivalents at the end of each year seem to contain a very high amount of highly liquid investments. |
Yes/No |
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Overall Boeing”s cash flows are highly favourable and its ability to generate positive cash flows from operations and ability to meet its obligations in future is huge… |
R:ght Wrong |