Review the existing literature to critically examine the relative information content of the
income statement and the statement of cash flows. Why do investors find both income statement and statement of cash flows useful?
Part B
Download the annual financial reports ofBHP Ltd, Santos Ltd,andFuntasticLtd for the year 2019, 2018 and 2017. Examine the consolidated Cash Flow Statements for each companies across three years. Answer the following questions about each of the three cash-flow statements.
1. For each companies [except mentioned otherwise as in c), g) and i) below], across three years on the Statement of Cash Flows discuss:
- a) What are the major sources of cash for each firm? What are the major uses of cash for each firm?
- b) What was the trend in cash flow from (continuing) operations for each firm?
- c) Compare and contrast the cash flow from operations with the net profit after tax in income statement. Explain in detail the major reasons for the difference between these two figures.(Answer this question using only the Cash flow
statement for BHP Limited).
- d) Was the firm able to generate enough cash from operations to pay for all of its capital expenditures?
- e) Did the cash flow from operations cover the dividend payment made by the firm (if any)?
- f) If the firm has generated excess cash from operations, how did the firm invest the excess cash? If not, what were the sources of cash the firm used to pay for the capital expenditures and/or dividends?
- g) Did the firm use the working capital (current asset and current liability) accounts other than cash and cash equivalents as sources of cash, or uses of cash?(Answer this question using only the Cash flow statement for BHP Limited).
- h) What other major items affected cash flows for each firm?
- i) What was the trend in capital expenditures for each firm?
- j) What was the trend in dividends (if any) for each firm?
- k) What was the trend in net borrowing (proceeds from borrowing less payments
of short- and long-term debt) for each firm?
- l) What was the trend in working capital accounts?(Answer this question using
only the Cash flow statement for BHP Limited).
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HI5020 Corporate Accounting Individual Assignment 2 2020
Page3of112. Critically evaluate the financial strength of each of the three companies based on the
evidence presented in the Statement of Cash Flows, and your answers in (1) above.
3. If you are asked to evaluate these three companies for lending purposes, which of the three companies you will select for lending? Explain Why.
Assignment Structure should be as the following: Abstract- One paragraph
List of Content
Introduction
Body of the assignment with detailed answer on each of the required tasks Summary/Conclusion
List of references
Instruction for video presentation:
Based on your written assignment, you will have to make a summary video presentation ranging for 10 minutes. Your presentation should explain the assignment tasks and your key findings. You will have to upload the presentation in YouTube and submit the YouTube link in the blackboard so that the marker can watch and mark your presentation. Your assignment will be marked based on the following criteria:
List of content & overall presentation of the assignment Introduction
1% 1% 1%
| Do the relevant research to critically examine the relative information content of the income statement and the statement of cash flows. Why do investors find both income statement and statement of cash flows useful? | 5% |
HI5020 Corporate Accounting Individual Assignment 2 2020
Page4of11What are the major sources of cash for each firm? What are the major uses of cash 1%
for each firm?
What was the trend in cash flow from (continuing) operations for each firm? 1%
Was the firm able to generate enough cash from operations to pay for all of its capital 1% expenditures?
Did the cash flow from operations cover the dividend payment made by the firm (if 1% any)?
What other major items affected cash flows? 1%
What was the trend in capital expenditures for each firm? 1%
What was the trend in dividends (if any) for each firm? 1%
What was the trend in net borrowing (proceeds from borrowing less payments of 1% short- and long-term debt)?
What was the trend in working capital accounts? (Answer this question using only the 1% Cash flow statement for BHP Limited).
Critically evaluate the financial strength of each of the three companies based on the 5% evidence presented in the Statement of Cash Flows.
If you are asked to evaluate these three companies for lending purposes, which of the 2% three companies you will select for lending? Explain Why.
Conclusion 1% References 1%
| Compare and contrast the cash flow from operations with the net profit after tax in income statement. Explain in detail the major reasons for the difference between these two figures. (Answer this question using only the Cash flow statement for BHP Limited). | 1% |
| If the firm has generated excess cash from operations, how did the firm invest the excess cash? If not, what were the sources of cash the firm used to pay for the capital expenditures and/or dividends? | 1% |
| Did the firm use the working capital (current asset and current liability) accounts other than cash and cash equivalents as sources of cash, or uses of cash? (Answer this question using only the Cash flow statement for BHP Limited). | 2% |
Do the relevant research to critically examine the relative information content of income statement and statement of cash flows. Why do investors find both income statement and statement of cash flows useful?
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Apply your judgement
Demonstrate outstanding knowledge beyond requirements on the topic.
Extensive relevant research Independent and in-depth analysis.
Issues and factors are presented and analyzed in a logical manner.
Broad and credible sources of references have been cited using proper referencing style.
What are the major sources of cash for each firm? What are the major uses of cash for each firm?
Major sources of cash and major uses of cash are identified and discussed in detail.
HI5020 Corporate Accounting Individual Assignment 2 2020
Demonstrate very good knowledge on the topic.
Substantial relevant research.
Issues are discussed adequately based on sufficient research.
Adequate references in proper referencing style.
Major sources of cash and uses of cash are identified.
Detailed discussion is provided with minor errors.
Demonstrate good knowledge on the topic.
Adequate relevant research.
Discussed the issue based on some research and facts. Scopes for improvement remain.
Adequate references in proper referencing style.
Major sources of cash and uses of cash are identified with minor errors.
Basic discussions are attempted with minor errors.
Page6of11
| Excellent | Very Good | Good | Satisfactory | Unsatisfactory |
List of content & overall presentation of the assignment
Demonstrate basic knowledge on the topic.
Some relevant research.
Meet the requirements but with limited information and discussion.
Limited references.
Major sources of cash and uses of cash are identified with material errors.
Basic discussions are attempted with material errors.
Demonstrate poor knowledge on the topic.
Limited and/or no relevant research.
The answers do not meet the basic requirement as no factual discussion is provided.
No reference.
No clear attempt is made to identify the major sources of cash and uses of cash.
No discussion is provided.
Marks
/1
Page7of11
Questions
Was the firm able to generate enough cash
What was the trend in cash flow from (continuing) operations for each firm?
Excellent
Very Good
Good
Satisfactory
Unsatisfactory
Identify all cash flows from operation with specific
Identify all cash flows from operation with specific
Identify all cash flows from operation with specific
A reasonable attempt is made to identify cash flows from operation
No reasonable attempt is made to identify cash flows from operation with specific
Trends in the cash flows from continuing operations are identified and discussed adequately.
Demonstrate outstanding knowledge beyond requirements on the topic.
Independent and in-depth analysis.
Issues and factors are presented and analysed in a logical manner.
Trends in the cash flows from continuing operations are identified.
Discussion is not comprehensive.
Demonstrate very good knowledge on the topic.
Issues are discussed adequately
based on sufficient research.
Trends in the cash flows from continuing operations are identified with minor errors.
Basic discussion has been provided with minor errors.
Demonstrate good knowledge on the topic.
Trends in the cash flows from continuing operations are identified with material errors.
No discussion is provided.
Demonstrate basic knowledge on the topic.
Meet the requirements but with limited information and discussion.
No realistic attempt is made to identify the trend.
No discussion is provided.
Demonstrate poor knowledge on the topic.
Compare and contrast the cash flow from operations with the net profit after tax in income statement. Explain in detail the major reasons for the difference between these two figures. (Answer this question using only the Cash flow statement for BHP Limited).
Shows a complete comprehension of the relationship between net income and cash flows from operations.
The reasons for the differences between these two
figures are identified and discussed in detail.
The relationship between net income and cash flows from operations are explained.
The reasons for the differences between these two figures are identified and discussed with minor errors.
The relationship between net income and cash flows from operations are explained.
Identification of the reasons of the differences between these two figures contains material errors.
A reasonable attempt is made to identify the relationship between net income and cash flows from operations.
A reasonable attempt is made to identify the reasons of the differences between these
two figures but fail to completely grasp the issue.
Errors are identified in the answer.
A poor attempt is made to explain the relationship between net income and cash flows from operations.
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HI5020 Corporate Accounting Individual Assignment 2 2020
Marks
Page8of11
Questions
If the firm has generated excess cash from operations, how did the firm invest the excess cash? If not, what were the sources of cash the firm used to pay for the capital expenditures and/or dividends?
from operations to pay for all of its capital expenditures?
Excellent
Very Good
Good
Satisfactory
Unsatisfactory
Clearly identify and explain whether the firm has generated excess cash flows.
Present a good discussion on free cash flows and uses of excess cash flows.
Identify and explain whether the firm has generated excess cash flows.
Present a reasonable discussion on the concept of free cash flows and uses of excess cash flows.
Identify and explain whether the firm has generated excess cash flows.
Present a discussion on the concept of free cash flows and uses of excess cash flows with errors.
Identify and explain whether the firm has generated excess cash flows with some errors.
No discussion is made about free cash flows.
Incorrectly identify and explain whether the firm has generated excess cash flows.
No discussion is made about free cash flows.
mention of whether it is positive or negative.
Identify all capital expenditures and synthesise the adequacy of cash flows from operations to cash required for capital expenditures.
mention of whether it is positive or negative.
Identify all capital expenditures.
Unable to explain whether the adequacy of cash flows from operations is adequate for cash required for capital expenditures.
mention of whether it is positive or negative.
Identify most capital expenditures.
Unable to explain whether the adequacy of cash flows from operations is adequate for cash required for capital expenditures.
with specific mention of whether it is positive or negative.
Identify some capital expenditures.
Unable to explain whether the adequacy of cash flows from operations is adequate for cash required for capital expenditures.
Some errors are identified in the answer.
mention of whether it is positive or negative.
Fail to identify most capital expenditures.
Unable to explain whether the adequacy of cash flows from operations is adequate for cash required for capital expenditures.
Material errors are identified in the answer.
Did the cash flow from operations cover the dividend payment made by the firm (if any)?
Clearly demonstrate the sources of fund used for and dividend.
Demonstrate outstanding knowledge beyond requirements on the topic.
Demonstrate the sources of fund used dividend. Minor errors.
Demonstrate very good knowledge on the topic.
Address the question but unable to clearly indicate whether the cash flows from operations were enough
for dividend payment.
Demonstrate good knowledge on the topic.
Answer the question correctly with a simple“yes” or “No” answer.
No discussion is provided.
Demonstrate basic knowledge on the topic.
Incorrectly answered the question with a simple“yes” or “No” answer.
No discussion is provided.
Demonstrate poor knowledge on the topic.
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HI5020 Corporate Accounting Individual Assignment 2 2020
Marks
/2
Excellent
Very Good
Good
Unsatisfactory
Did the firm use the working capital (current asset and current liability) accounts other than cash and cash equivalents as sources of cash, or uses of cash? (Answer this question using only the Cash flow statement for BHP Limited).
Demonstrate a clear understanding of how changes in current assets and current liabilities can be source of fund and/or uses of fund.
Correctly explain whether the firm has used working capital items as sources of operating cash flows or uses of operating cash flows.
Present a good
discussion on whether
the firm has used current assets
and current
liabilities as sources of fund or uses of fund.
Present an item-wise discussion on each current assets and current liability items with minor errors.
Present a reasonable discussion on whether the firm has used current assets and current
liabilities as sources of fund or uses of fund.
Present an item-wise discussion on each current assets and current liability items with material errors.
Present a discussion on whether the firm has used current assets
and current
liabilities as sources of fund or uses of fund with minor errors.
Unable to present a proper discussion on each current assets and current liability items.
Present an incorrect discussion on whether the firm has used current assets and current liabilities as sources of fund or uses of fund.
Unable to present a proper discussion on each current assets and current liability items.
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Cash flows from sources other than operating activities are identified.
Cash flows from investing activities and financing activities are identified and explained in detail.
Demonstrate a comprehensive understanding of the topic.
HI5020 Corporate Accounting Individual Assignment 2 2020
Cash flows from sources other than operating activities are identified.
Cash flows from investing activities and financing activities are identified and explained with minor errors.
Demonstrate a very good understanding of the topic.
Cash flows from sources other than operating activities are identified with minor errors.
Cash flows from investing activities and cash flows from financing activities are separately identified and explained with material errors.
Page9of11
Questions
Satisfactory
The discussion on uses of excess cash flows is unclear.
No discussion or incorrect discussion is made on uses of excess cash flows.
What other major items affected cash flows?
Cash flows from sources other than operating activities are identified with material errors.
Cash flows from investing activities and cash flows from financing activities are not separately identified and explained.
Meet the requirements but with limited information and discussion.
Demonstrate poor knowledge on the topic.
No reasonable discussion is provided on cash flows from sources other than operating activities.
The answers do not meet the basic requirement as no factual discussion is provided.
Questions
Marks
/1
/1
/1
/1
/5
Excellent
Very Good
Good
Unsatisfactory
What was the trend in capital expenditures for each firm?
Trend in capital expenditures for each of the three firms is correctly identified and discussed comprehensively.
Trend in capital expenditures for each of the three firms is correctly identified.
A good level of discussion is provided.
Trend in capital expenditures for each of the three firms is correctly identified but not well discussed.
Trend in capital expenditures for each of the three firms is correctly identified.
No discussion on the trend is provided.
Trend in capital expenditures for each of the three firms is not correctly identified.
No discussion on the trend is provided.
What was the trend in dividends (if any) for each firm?
Trend in dividends for each of the three firms is correctly identified and discussed comprehensively.
Trend in dividends for each of the three firms is correctly identified.
A good level of discussion is provided.
Trend in dividends for each of the three firms is correctly identified but not well discussed.
Trend in dividends for each of the three firms is correctly identified.
No discussion on the trend is provided.
Trend in dividends for each of the three firms is not correctly identified.
No discussion on the trend is provided.
What was the trend in net borrowing (proceeds from borrowing less payments of short- and long-term debt) for each firm?
Trend in net borrowing for each of the three firms is correctly identified and discussed comprehensively.
Trend in net borrowing for each of the three firms is correctly identified.
A good level of discussion is provided.
Trend in net borrowing for each of the three firms is correctly identified but not well discussed.
Trend in net borrowing for each of the three firms is correctly identified.
No discussion on the trend is provided.
Trend in net borrowing for each of the three firms is not correctly identified.
No discussion on the trend is provided.
What was the trend in working capital accounts? (Answer this question using only the Cash flow statement for BHP Limited).
Trend in working capital is correctly identified and discussed comprehensively.
Item-wise discussion is provided
Trend in the working capital is correctly identified.
A good level of discussion is provided on each item.
Trend in the working capital is correctly identified.
The trend is not discussed item-wise.
Trend in the working capital is correctly identified.
No discussion on the trend is provided.
Trend in the working capital is not correctly identified.
No discussion on the trend is provided.
The financial situations of all three companies are comprehensively discussed
Logical and accurate conclusion is drawn based on the discussion.
HI5020 Corporate Accounting Individual Assignment 2 2020
A very good discussion is provided on the financial situations of all three companies.
The financial situations of all three companies are discussed with scopes for improvement.
Attempt to draw a conclusion but
Page10of11
Satisfactory
Critically evaluate the financial strength of each of the three companies based on the evidence presented in the Statement of Cash Flows.
The financial situations of all three companies are discussed but most of the discussion is basic and scattered.
The financial
situations of all three companies are discussed.
The discussions are not logically linked.
Questions
Excellent
Very Good
Good
Satisfactory
Unsatisfactory
Demonstrate outstanding knowledge beyond requirements on the topic.
Issues and facts are presented and analyzed in a logical manner.
Logical conclusion is drawn based on the discussion.
Demonstrate very good knowledge on the topic.
Issues are discussed adequately based on sufficient research.
it is not logically and factually sound.
Demonstrate of good knowledge on the topic.
Discuss the issues based on some research and facts with scopes for improvement.
The discussions are not logically linked.
Demonstrate basic knowledge on the topic.
Meet the requirements but with limited information and discussion.
Demonstrate poor knowledge on the topic.
The answers do not meet the basic requirement as no factual discussion is provided.
If you are asked to evaluate these three companies for lending purposes, which of the three companies you will select for lending? Explain Why.
Make a clear and accurate selection highlighting the reason for the selection.
Discussion is based on facts and figures.
Make a clear and accurate selection.
A good level of discussion is provided on the selection.
Make a clear and accurate selection.
A basic discussion is provided on the reasons for selection.
Make a clear and accurate selection.
No discussion is provided on the reason for the selection.
The selection is inaccurate.
No reasonable discussion is provided on the reason for the selection.
Conclusion
References
Total in Written assignment /30
Video presentation Total
Marks
/2
