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    Alpha Corporation

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    Mohit Dhawan
    The document summarizes the sources and uses of cash for Alpha Corporation over three years based on its Statement of Cash Flows. Major sources of cash changed each year, starting as debt issuance in 1989, then sales of discontinued operations and assets in 1990. In 1991, sources were reduction of accounts receivable, sales of assets, and restructuring. Cash flow from operations was positive each year but did not fully cover capital expenditures or dividends, so additional cash sources like asset sales were needed.

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    Alpha Corporation

    Uploaded by

    Mohit Dhawan
    191 views2 pages
    The document summarizes the sources and uses of cash for Alpha Corporation over three years based on its Statement of Cash Flows. Major sources of cash changed each year, starting as debt issuance in 1989, then sales of discontinued operations and assets in 1990. In 1991, sources were reduction of accounts receivable, sales of assets, and restructuring. Cash flow from operations was positive each year but did not fully cover capital expenditures or dividends, so additional cash sources like asset sales were needed.

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    The document summarizes the sources and uses of cash for Alpha Corporation over three years based on its Statement of Cash Flows. Major sources of cash changed each year, starting as debt issuance in 1989, then sales of discontinued operations and assets in 1990. In 1991, sources were reduction of accounts receivable, sales of assets, and restructuring. Cash flow from operations was positive each year but did not fully cover capital expenditures or dividends, so additional cash sources like asset sales were needed.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    191 views2 pages

    Alpha Corporation

    Uploaded by

    Mohit Dhawan
    The document summarizes the sources and uses of cash for Alpha Corporation over three years based on its Statement of Cash Flows. Major sources of cash changed each year, starting as debt issuance in 1989, then sales of discontinued operations and assets in 1990. In 1991, sources were reduction of accounts receivable, sales of assets, and restructuring. Cash flow from operations was positive each year but did not fully cover capital expenditures or dividends, so additional cash sources like asset sales were needed.

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    © All Rights Reserved
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    Exhibit 1: Alpha Corporation I. For each of the years on the Statement of Cash Flows: 1.

    What were the firms major sources of cash? Solution 1. Sources of cash: Sales of depreciable assets and sales of discontinued operations in 1990 and increasingly from operating activities, especially related to restructuring and other unusual items. 2. What were the firms major uses of cash? Solution 2. Cash comes mainly from payment of debt and investments in depreciable assets. 3. Was cash flow from operations greater than or less than net income? Explain in detail the major reasons for the difference between these two figures. Solution 3. The net income was negative from 1989 to 1991. The net income is negative due to the depreciation costs. Operating cash flows have been positive and have increased every single year. The firm has started generating positive operating cash flows and has repaid a considerable amount of debt. 4. Was the firm able to generate enough cash from operations to pay for all of its capital expenditures? Solutions 4. No. In 1991 the capital investments were $157M, whereas the operating cash flows amount only to $125M. 5. Did the cash flow from operations cover both the capital expenditures and the firms dividend payments, if any? Solution 5. No. See question 3. The company has been decreasing the amount paid in dividends down to 0 in 1991. 6. If it did, how did the firm invest its excess cash? Solution 6. N/A 7. If not, what were the sources of cash the firm used to pay for the capital expenditures and/or dividends?

    Solution 7. The main sources of cash have changed through the years. In 1989 the issuance of debt was the main source ($305M). In 1990, though, the major sources of cash were the sale of discontinued operations ($407M) and restructuring ($384M) as well as the sales of depreciable assets ($242M). In 1991, the main sources of cash were the reduction in A/R ($160M), sales of depreciable assets ($157M) and restructuring ($135M).

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