College of Business Administration
FINANCIAL STATEMENT ANALYSIS
Eastman Kodak Company
COMPREHENSIVE CASE ANALYSIS
Chapter 4: Statement of Cash Flows
Submitted by:
Ibrahim Al-Gusaier
Fawaz alsahan
Maohammed Alansari
SUMMER 2012
200600005
200600729
200901949
Statement Of Cash Flow
Statement of Cash Flows
ANALYSIS
A. Analysis of cash flow from operating activities
The net cash provided by operating activity is steadily decreasing over the three year
period consistent with the constant decreases in net sales over the same period. This means
that operation is declining, a sign of financial trouble.
Accounts receivables are decreasing, this means that they are collected and converted
to cash. It means also that the company’s credit policy has been tighten or worst, the sales
department is not moving inventories, it is now difficult for them to sell the product because of
the presence of strong competition, product obsolescence, or poor economic conditions in the
market.
Inventories are decreasing; this means that inventories are moving. The production may
be less than the sales, prompting the company to use reserve inventories to fill the gap.
The company’s ability to generate cash from operations is significantly declining. The
trend is downward and the amount is significant. If the trend will continue, the company will
face financial problems.
B. Analysis of cash inflows
Cash flows from operating activities supplied 17.9% of the needed cash in 2006, 34.1%
in 2006 and only 10.3% in 2007. For a company to be financially healthy, this percentage must
be the highest compare to other sources of cash. A significant low is reported in 2007 compare
to the preceding two years.
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Statement Of Cash Flow
The company significantly borrowed in 2005 (62.5% on the needed cash) and in 2006
(38.1% of the needed cash).
During 2007, proceeds from discontinued operations supplied 71.8% of the needed
cash. This make up majority of the cash inflows. This means that the company is disposing off
some of its operations, thus negatively affecting its cash flows from operating activities.
Other sources of cash includes sales of property, plant and equipment 3.2%, 8.9% and
6.6% for the years 2005, 2006 and 2007 respectively, sale of marketable securities 4.5%, 6.6%
and 4.9% for the years 2005, 2006 and 2007 respectively.
C. Analysis of cash outflows
The major increase in cash outflows is payment of long-term borrowings. Payment of
long-term borrowing makes up 49.6% of the total outflows in 2005, 71.2% in 2006 and 70.2% in
2007. Capital expenditures are decreasing but still the company is making investments in
property, plant and equipment in an effort to turnaround the operations. The company also
uses the cash generated to purchase marketable securities and short-term investments (5.4% in
2005, 6.1% in 2006 and 8.9% in 2007) and to pay stockholders dividends of 144 million a year.
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Statement Of Cash Flow
Summary and Conclusion
In 2005 cash increase by 410 million the cash inflows is greater than the cash outflows.
Majority of the funds came from borrowings (financing activity) followed by operations
(operating). The funds were used to pay off maturing liabilities (financing), purchase property
plant and equipment (investing) and pay dividends (financing).
In 2006 cash decrease by 196 million the cash inflows is lower than the cash outflows.
Majority of the funds came from borrowings (financing activity) followed by operations
(operating). The funds were used to pay off maturing liabilities (financing), purchase property
plant and equipment (investing) and pay dividends (financing).
In 2007 cash increase by 1,478 million the cash inflows is greater than the cash outflows.
Majority of the funds came from proceeds from discontinued operations (investing activity)
followed by operations (operating).
The funds were used to pay off maturing liabilities
(financing), purchase property plant and equipment (investing) and pay dividends (financing).
Cash improved in 2007 only because of the proceeds from sale of discontinued
operations and not from operating activities of the business.
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Statement Of Cash Flow
References
Eastman Kodak Company 2007 Annual Report on Form 10-K
Fraser, L., Ormiston, A. “ Understanding Financial Statements” 9th Edition. Pearson Education,
Inc., Prentice Hall, New Jersey 2010.
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