Income statement is referred to net revenue that companies generate including revenue, expenses and profit that facilitates in understanding business operations. This is one of the effective ways to determine the sustainability of a business. It provides a clear understanding of gross profit and administrative expenses. The periodic income statements are aggregated into annual results and total revenue generated by the company. The profit or loss is also included in the income statement that facilitates companies in undertaking better decision for a business. Similarly, statement of cash flows is referred to a financial statement that a comprises of data regarding external investment and ongoing investment that help in determining business activities to make sure business operations can be operated vigilantly (Cook et al. 2016). The statement of cash flows comprises of cash flows from operations, investing and financing effectively. These statements facilitates in undertaking better decision to assure that cash generated from operating activities is optimum to bear all the liability and dive ended positively. All the components of the statement of cash flows help in monitor each and every activity of business from where a reliable amount can be cut off to upsurge profit margin positively.
The financial statement implies the rate of sustainable growth of business operation to make sure a positive change can be amended within the organization. These two statements are important factors for the investor to understand the sustainable growth business. The statement of cash flows, distinguish cash flow in operating activities and investing to assure that an investor gets profit by investing some amount of capital into business (Poolton et al. 2016). Apart from the sustainable growth of a business, it also facilitates in undertaking critical business decision to tackle potential risk and challenges related to the operation and financial statement. On another hand, the financial statement helps an investor in understanding the profit margin that a company gains to ensure that investors would be benefited by investing in the business.
.Examination of the flow sataement
The major source of cash flow for Funtastic limited is from operational activities, supplier and finance paid, which is continuously decreasing from 2016 to 2018 by about 15%. The company invest some capital in different activities such as commercial bills and share issues.
In regard to BHP limited, the major source of cash is trade, inventories, amortization and impairments. The profit of this company in 2018 is 14, 75 dollars, which is higher than in 2017 that is 11,137 million dollars. This cash flow has been used in the settlement of cash management with respect to the instrument and net income tax related to the discontinued operation and continuous operation.
Furthermore, Santos Limited has a range of cash sources such as pipeline tariffs, restoration expenditure and excise paid. These sources of capital have been used in operating activities and investing activities such as borrowing acquisition of gas assets, disposal of subsidiaries and repayment of borrowings (Salehi et al. 2017).
The major trends in Funtastic Limited are cash flows from financial activities such as costs of share issues and proceeds from borrowing. The cost of share issues for this company is 438 dollars in 2018 and cash flows in borrowings are 2630 dollars in 2018. This influence the profit margin of the company that is determined from cash equivalent in 2018 is 718 dollars, which is comparatively higher than 2017 that is 664 dollars.
The trends in BHP limited are trade, settlement of cash management and purchase of property that influences the cash flow of an organisation. The influence of these trends can be determined from the profit margin before taxation. In 2016, the company gain 1,791 million dollars, which get decreased in 2018 that is 1,471 million dollars. These data signify that the net cash equivalent in 2018 is comparatively that is 15, 8136 million dollars, which is comparatively higher than 2016 that is 10,276 million dollars.
The cash flow statement of Santos Limited implies that purchase of treasury share and drawdown of borrowings are major trends that reduce the total revenue of an organisation (Chaston et al. 2018). In 2018, the cash flow of borrowings in 2018 is 1,193 million dollars that are comparatively high as compared to 2017 that is 783 million dollars.
The cash flow from operating activities related to BHP Limited help in generating profit that is 14,751 million dollars in 2018 that is high as compared to 2016, which is 1,791 million dollars. On the contrary, the net income from operating activities in 2018 is 15,813 million dollars, which is progressively increasing from 2016 that is 10,276 million dollars. These two data a signifies that cash flow from operation is greater than net income due to continuing investment in different assets such as dividend paid and non-controlling interests (Bell et al. 2015). It implies that the company is not liable to the repayment of interest as the bearing liabilities are gradually increasing from 2016 to 2018 that is 2781 to 4188 million dollars. The major reason behind the difference is due to financial cash flow from continuing operations and discontinuing operations that reduce the purchase of shares by ESOP (Employee Share Ownership Plan) trust.
BHP can successfully generate enough cash to pay their capital expenditure that can be measured from generating income from operations and cash flows within an organisation. In 2018, the cash generated from operations is 22,949 million dollars that are comparatively greater than 2016 that is 12,091 million dollars (Li et al. 2016). It was used in paying capital expenditure such as cash equivalent and discontinued operation. BHP has paid about 5,220 million dollars dividend paid that includes continuing operations and discontinuing operations.
The net investing cash flows in 2018 are 5,921 million dollars that embrace sales assets, subsidiaries, and a joint operation. This is comparatively lesser than 2016 that is 7,245 million dollars that implied that investment in other assets such as divestment of subsidiaries and property. The net financial cash flows are 10,891 million dollars in 2018 that greater than 2017 that is 9,133 million dollars. These data signify that the cash flow for both capital expenditure and dividend payment is not fully paid from operating activities (Marić et al. 2017). It can be better understood from the profit generated by the company in 2018 that is 14,751 million dollars. The net cash flows from continuing operations in 2018 are 10,851 million dollars, which cannot be paid through generates cash from operations.
The cash generated from operation in 201 is 22,949 million dollars that are not enough to pay all the liabilities from continuing operation and discontinuing operation. In case if the company generates excess cash then it is easy to purchase higher share by ESOP trust. The dependent paid can be reduced, which is 5,220 million dollars in 2018 and 4,130 million dollars in 2016. The net of overdraft and cash equivalent at the end of the financial year is 15,813 million USD. On the contrary, if the company could not able to generate optimum cash then BHP limited require increasing the operational activities from inventories and provisional liabilities (Zunarni, 2017). In 2018, the cash generated from the trade is 662 USD, which is less as compared to the data of 2016 that is 1,387 USD. In order to pay capital expenditure and dividends, it is essential to emphasis on accounted investment and related impairment, which is comparatively lesser as compared to 2016 that is 2104 USD. These data signify that increasing operational activities helps in paying dividends and interest received by BHP.
The cash generated from operation in 2018 is 22,949 million dollars, which is greater than in 2016 and 2017 that are 12,091 and 18,612 million dollars. This data signifies that BHP limited used working capital both current liabilities and current assets to enhance profit margin positively. The cash flow statement of BHP Limited implies that the purchase of plant and property is 4,979 million dollars in 2018, which is greater than 2017 that is 3,697 million dollars. The financial activity is an effective example to understand the utilization of working capital such as divestment of subsidiaries, joint operation and operating cash flow that contributes to increasing net cash equivalent.
There are several activities that affect the cash flow of BHP limited that can be measured by evaluating the change in financial activities. The interest-bearing liabilities in 2016 are 7,239 USD that gradually decreased to 528 USD drastically. This eventually increases the debt related to the instrument to 218 USD, which is lesser in 2016 that is about 156 million dollars (Indriaty, 2018). In addition, the net cash flow from discontinuing and continuing operations is playing a leading role in cash flows. In 2018, the continuing operations generate about 10,851 USD that reduce the liabilities of BHP.
Capital expenditure is one of the effective ways to understand the liabilities of a company that drives business and sustainable development. In regard to Funtastic Limited, the major trends in capital expenditure are the effect of the exchange rate on the balance related to foreign currencies. This effect reduces the cash equivalent of the company in 2018 that is 718 AUD, which is comparatively lesser than 2016 that is 764 AUD.
Foreign currency exchange rate is considered as major trends in capital expenditure with respect to BHP Limited. In 2017, the exchange rate was 322 USD that gradually reduce in 2018 to 56 USD that increases the cash equivalent of the company from 2016 to 2018 that is 10,276 to 15,813 USD. Furthermore, the major trends are a drawdown of borrowings and repayments of borrowing that gradually decreased the cash flow (Primorac, 2016). In 2018, Santos Limited has made some repayment of borrowing, which is about 220 million USD, which is comparatively lower. In case of a drawdown of borrowing, the company has paid about 1193 million USD.
The income taxes refunded is a major trend as a dividend that reduces the cash equivalent of Funtastic Limited that get reduced from 2016 to 2018 that is 163 AUD to 49 AUD. the net cash flow w from operating activities is 2018 is 10,1852 AUD, which is comparatively higher than in 2016. In respect to BHP, dividends received in 20018 were 709 USD that is comparatively high as compared to 2016 (ERAWATI, 2016). Similarly, the interest received by the company was 290 USD, which is also greater as compared to 2016 that is 128 USD. In addition, the dividend paid by Santos Limited in 2018 was 73 million USD that is comparatively greater than in 2016 that is 43 million USD. It plays a significant role in influencing the net cash provided by the financial activities that are 890 million USD in 2018 that is lesser than in 2017 by 43%.
Funtastic Limited has commenced its business from borrowings that cost about 2,630 AUD, which comparatively lesser than 2016 that is about 7,457 AUD. the commercial bills and share issues create a leading role in increasing the cash flow from financial activities that is 10,547 AUD. In respect to BHP limited, there is no borrowing cost cash flow statement that signifies that the company has more liable as compared to other companies. On the contrary, Santos company has paid about 194 million USD that is a comparatively less than as compared to 2016 and 2017 that is 226 and 254 million USD (Mwangi, 2016). The net cash provided by operating activities is gradually increased from 2016 to 2018 that is 840 to 1578 million USD.
The interest of bearing liabilities resists company to upsurge business operations the higher the liabilities the lower the chance of capital gains. This implies that a purchase of shares by ESOP has reduced the net financial cash flows (Tukwain et al. 2018). The major trends in working capital are financing cash flows from discontinuing and continuing operation that influenced the net financial cash flows. In 2018, the cash flows from a continuing operation are 10,851 USD that is greater than the previous year that is 9105 USD. Furthermore, the net investing cash flows in 20018 are 5,921 USD that embraces sales for assets and exploration expenditure. The major trend in capital expenditure is 874 USD, which is lesser than in 2017 that is 966 USD.
2.Evaluation of the finanvial strength of each of the three companies
The statement of cash flows related to the operation, investment and financial give a clear understanding of a business operation that each company has undertaken to gain competitive advantage positively. In respect to Funtastic Limited, the net cash outflow from operating activities in 2018 was 10,182 AUD that is progressively increasing as compared to 2016 and 2017 that is 7,329 and 2,750 AUD. the cash flows in financial activities are about 10,547 AUD that clearly asserted that the outflow from operating activities is not reliable to bear all the liabilities (Malakouti et al. 2016). In contrast, the financial strength of Funtastic Limited is encountered share issues and repayment of commercial bills that facilitates in upsurge cash equivalent that is about 718 AUD, which is comparatively greater than the previous year.
The cash flows statements of BHP are comparatively greater due to the progressive growth of profit margin positively. The major issues in Funtastic limited are comp high costs of share issues that gradually reduced the financial performance of an organisation. Similarly, the cash equivalents at the beginning of the year are 664 AUD that is comparatively less from 2016 and 2017 that is 904 AUD and 764 AUD. The clearly asserted that Funtastic Limited is not reliable for lending purposes. The net financial cost of BHP in 2018 is 1245 million USD that is greater than in 2016 that is 1013 million USD. The progressive increased financial cost makes the company more liable to lend positively. On another hand, changes in assets and liabilities are null that implies a sustainable growth business. In addition, Santos Limited proceeds from issues of the ordinary shares that are about 149 million USD in 2017 that is comparatively lesser than 2016 that is 733 million USD. The effect of exchange rate on the balances of cash is higher that is 10 million USD. It signifies that Santos is not reliable for lending purposes. It can also be determined through cash equivalents at the end of the period that was 1,316 million USD in 2018, which was comparatively lesser than 2016 that is 2,026 million USD. On the contrary, Santos company has paid about 194 million USD that is a comparatively less than as compared to 2016 and 2017 that is 226 and 254 million USD.
The liabilities for lending purposes can also be determined through net operating cash flows that were 18,461 million USD in 2018, which are greater than 2016 by 28% that helps in understanding equity accounted investment. The funding and investment of equity accounted investments are gradually decreasing that increased the profit margin of the company positively. In 2018, the company proceeds from sales of assets are 89 million USD that is comparatively less than in 2016 and 2017 that is 217 and 234 million USD. It attracts the attention of investor due to the progressive growth of the BHP positively. On the contrary, the cash flows from continuing and discontinuing operations are creating a significant role in enhancing the reliability of lending purpose to make sure the profit margin of the company can be increased effectively. The investing cash flows are 5,921 million USD in 2018. The bearing liabilities of the company are 4188 million USD in 2018, which is lesser than in 2017 that is 7,114 million USD. BHP Limited always paid its debt that gradually increased the liabilities for lending purposes. Therefore, it can be stated that the BHP limited is more reliable for lending purposes s that increased the sustainable growth of business positively.
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