Cash Flow Statement
Cash Flow Trends
While the income statement and balance sheet of the entity provided useful insights into the financial position of the company, however, since these financial statements are prepared on the accrual basis, we also focused on unearthing the trends in the cash flow statement as the same is prepared on the cash basis and provides a true picture of the company’s financial position. Discussed below are the trends related to the three sections of the cash flow statement of the company:
-Cash Flow from Operations(CFO)
Analyzing the CFO amount over the past three years, we found that post witnessing the decline during 2014, the company generated a significant increase in the amount of cash flow from operations, which peaked from $14.6 million in 2014 to $149.66 million during 2015. The increase in CFO amount was largely attributed to the surge in the net income figures, which surged from $5.03 million in 2014 to $150.93 million. It is considerable that during 2013, the net income of the company was higher than the CFO amount and this raise concerns over quality of the company’s earnings, however, no such trend was witnessed during 2014 and 2015. Highlighted below is the data and graph comparing the net income and CFO amount over the past three years:
Cash Flow from Investing(CFI):
This section of the cash flow statement reveals information relating to the capital investment made by the company on cash basis. Referring to the cash flow statement of the company, we found that over the period of past three years, the company has been consistently its investment in the purchase of securities, however, during 2015, the amount of cash flow outflow from investing was reduced significantly on account of maturity of existing investments worth $419 million. Overall, we can witness that there is a defensive approach of the company in terms of capital investment as even when it generated $149.69 million in CFO amount, it opted for minimal investment in capital assets. Highlighted below is the amount of cash flow from investing activities:
Cash Flow from Financing Activities
This section of the cash flow statement reveals the transaction relating to funding activities of the company. Analyzing the cash flow statement of the company, we witness tidal trends in the cash flow from financing activities as while during 2014, the company recorded cash outflow of -$1.47 million, during 2015, it generated cash inflow of $9.16 million, which it collected primarily through the additional stock issue amounting to $9.52 million. Highlighted below is the amount of cash flow from financing activities over the period of past three years:
Overall change in cash flow amount
Over the period of three years, the amount of cash reserves of the company has increased from $220.17 million in 2013 to $292.34 million in 2015.However,the increase here cannot be rated as sustainable as even though the company has been generating positive operating cash flow throughout, however, it has cared least to spend the amount of purchase of capital assets and has rather focused on increasing its cash pocket through an additional stock issue.
References
MicroStrategy. "SEC 10K." Annual Filing. 2015.
Wall Street Prep Team. “Why is the cash flow statement important and how does it compare to the income statement?”. 4 April 2012. 5 November 2015 <https://www.wallstreetprep.com/blog/why-is-the-cash-flow-statement-important-and-how-does-it-compare-to-the-income-statement/>.
