The Secret of Cash Flow Patterns
Kara Nemrow, a security analyst for Primer Mead & Co., asserts that she can tell more about a company’s financial condition by looking at the trends of the negative or positive cash flows in the three categories than from other information found in the financial statements. She illustrates her theory with the following pattern of cash flows for Atlas Security over the past three years.
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2008 |
2007 |
2006 |
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Net income |
+ |
+ |
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Cash flows from: |
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||
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Operating activities |
|
+ |
+ |
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Financing activities |
+ |
+ |
+ |
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Investing activities |
+ |
+ |
+ |
How do you think Kara would analyze this pattern? Do you agree that analyzing cash flow patterns provides superior analytical information?