Cash flows
The statement of cash flows is used by the company as a measure of a company’s financial health. This financial statement equals the cash receipts less the cash payments over a period of time, alternatively, it is the net profit summed with the amounts charged off depletion, depreciation, and amortization.
The statement of cash flows organizes and reports the cash generated as is used in;
Cash from operating activities; this converts the items that are reported on the income statement from the accrual basis of accounting into cash basis. This is the generated cash earnings before interest and taxes summed up with the depreciation less the taxes.
The company Andrews has its round one cash from operations at $1,101 with increases in the following rounds with round 8 bearing the highest value of cash from operating activities with $95,782. The figures are positive except for round 3 where the cash from operation was - $18,798 as a result of shortages in inventory and sums of the accounts receivables indicating a cash outflow.
For Andrews, this growing cash from operations is an indicator of growth in sales and equally market share for their products. This gives the company very robust cash standing enabling them acquire debt capital easily and increases their liquidity position.
Cash from Investing; this is cash which derived from investing activities, and reports the purchase and sale of the property, plant, long-term, and equipment in investments. The company invests so as to increase its market size and reach to customers. Andrews made plant
improvements with invested amounts from $25,240 to $56,800. This shows the desire of the company to increase production and delivery as these plant improvements increases the company’s operation capacity.
Cash from Financing; it is through this that the company raises finances for expansion and growth. This reports the company’s issuance and repurchase of its own bonds and stock and the equal repayment of dividends. For Andrews, it acquired a long term debt issue of $18 million in round one, 25 million in round 2, 20 million, 20 million, 0 debt issued, 20 million, 40 million, and 40 million respectively from round 3 through to round 8. In addition, there are outflows in form of retirement of long term debt with zero in round one, -$6,950 million, zero cash, -$13,900, zero cash, -$20,850 million, zero cash, and zero cash in long term debt retirement respectively.
In addition, the company issued stock of amounts; $13million in round one, in round two no stock issued, $10 million worth of stock issued in round three and round four, in round five and six no stock was issued by the company. Stock worth $20 million was then issued in round seven and in round eight no stock was issued. Equally, no stock retirement occurred until round eight in which an outflow of stock retirement worth $23 million was made.
These cash out flow and cash inflow for the company provided finance for Andrews with round one financing being $41 million, $25 million, $29,655 million, $28,395 million until round four respectively. In round five and six there were out flows in financing with $3,900 million and $3,870 million. In the following rounds seven and eight, $28,819 million and $3,870 million were available to the company for finance purposes.
The non-retirement of stock in those rounds indicated the investor confidence in the company stock as they ploughed back the dividends and purchases more common stock. This strong stock performance is equal to the company’s indicative performance which is on a growing trend.
Current Ratio
This shows the company’s liquidity position in that it has cash or easily convertible cash equivalents and instruments that enable it pay its short term debts to suppliers and creditors. The computation of the current ratio is;
Current AssetsCurrent Liabilities
The company’s current ratio will determine its ability to acquire short term debt and payables and even the ability of paying them back using its short term instruments such as inventory and cash convertibles. A company that has a strong capability of meeting its short term obligations is indicated by a higher current ratio unlike a company that has a lower ratio that would indicate its minimal capability of meeting its short term liabilities.
“Cash is King” and those companies that have a lot of it have a strong bargaining power over the suppliers and competitors. Below is a table indicating the ratios of companies through from round one to eight.
In addition, the table shows Andrews’ current ratios as being the highest among its peers in the industry. This shows its market dominance and its high liquid position that would be turned into investment. In round four, Digby Company had a strong current ratio position higher than Andrews indicating its high liquidity during that period.
Balance Sheet and Income Statement
The balance sheet is also referred to as the statement of financial position. This financial statement indicates the financial standing of the company at the end of a trading period. It would indicate to creditors, bankers or lenders whatever the company owns and what it owes other creditors also if the company qualifies for additional credit.
The balance sheet figures are used to compute investment quality measurements such as asset performance, working capital adequacy, and capitalization structure which show the balance sheet’s strength. Andrews had its total assets at $138, 175 million in round one and steadily increased its asset base to $170,356 million in round two up to $445,139 million in round eight depicting its capacity to produce.
Also, the company’s total liabilities increased but at a controlled rate from $78,512 million in round one until $259,845 in the eighth round. Since the company is expanding and growing its market, it needs additional capital hence an increase in the amount of borrowing in form of long debts which increased from $59,700 to $183,000 million, current debts increased from $10,000 to $60,000 million.
In addition, the company’s equity in round one was $59,663 and it steadily rose to $185,294 in round eight. The income statement indicates the profit margin and the profit mark-up of the company. It also shows the company’s Earnings before Interest and Tax which stood at $6,338 million in round one and increased considerably to $127,939 million in round eight.
For R and D in round one the amount allocated was $3,916 million which fluctuated and actually reduced except for round 5 where it was $4,611 million and then dropped again until in round eight which it stood at $3,086 million. The company’s net profit was at negative from the onset indicating the company operated at a loss of $1,278 million but in round two it increased to $6,329 million and a sharp drop realized in round three to achieve a profit of $946 million.
The final profit made in round eight was $60,907 which was greater than any other company in the industry proving the lead position in the industry as being the most profitable.
Andrews’ share price
A company’s share price is that portion payable from the profits allocated to the outstanding common stock. A high share price or value indicates the company is more profitable and hence more attractive to investors. It is computed as follows;
Net Income-Dividends on Preferred stockAverage Outstanding Shares
In the industry, Andrews’ average share price over the period of eight rounds is equal to 7.8 with its average earnings per share being 9.0, and dividend to be earned per share is equal to 16.3. Its competitor Baldwin has an average share price of 6.0, earnings per share as 6.5, and dividends per share as 13.0. This being the second most desirable company to invest in as depicted with the earnings per share and the dividends to shareholders.
Ethical decisions
Ethics refers the ethical awareness, principles, and reasonable skills determine the standards of behavior guiding us in our daily lives. Ethical considerations assist in the structure our social organizations, businesses, schools, communities, governments, and places of worship and the respective development of rules and regulations.
These ethical practices rely on the rational thought to advise us as to how we are supposed to act with respect to fulfilling our duties and obligations. Therefore, ethical decisions are those that bear an approach in developing an ability to judge an ethical implication.
For strategic ethical reasoning to be applied on the respective company staff, then areas to consider include;
- Application of numerous principles and approaches to assist view the situation from different vantage points, so as to reveal those facets of the issue not yet considered
- A multi-faceted process encourages discussion and eliciting additional viewpoints showing how they differ or converge.
- Application of these strategies separately so as to reach similar decisions vis-à-vis a suggested action.
- The consideration of multiple approaches so that confidence is strengthened among the staff concerned in a decision.
- Also, the company’s managers application of a multi-faceted process provides a structure that can be used to assess an action in the repercussion, and enables us ask practical lessons gained from the situation.
References
Deeprose, D. (2002). Project management. Oxford, U.K: Capstone Pub.
Bridgeman, N., & Bridgeman, E. (2003). Project success: Defining, designing, constructing & presenting a capstone project for the tertiary student. New Plymouth, N.Z: Best Ways Books.
Jerome Levy Economics Institute. (1999). Strategic analysis. Annandale-on-Hudson, N.Y: Levy Economics Institute of Bard College.
