In seeking to enhance evaluation of companies, a cash flow statement is especially useful. It gives the true condition of a company’s financial well being and is a good basis to identify cash flow problems and cash flow opportunities in a company (Faulkender, 2006). This paper seeks to explore a cash flow statement for the Candela Corporation, for the years ended June 2002 through our 2003 to the year ended July 3rd, 2004.
Analysis of Candela Corporation’s Cash flow Statement
The statement starts with net earnings and works backward, adding in depreciation and subtracting out inventory and accounts receivable (Wallick, 2009).This means earnings before interest and taxes. In the case of Candela Corporation, the statement in the year ended June 2002 represent s a negative amount 2,154.however in the course of the three years; the figure is represented by positive income from operating activities. Although cash from operating activities starts with a negative figure in 2003 and 2004 the number steadily increases. This is indicative of positive growth in the company’s core business (Faulkender, 2006). Analysis of the operating cash flow in the first year reveals that it was unable to cater for annual capital expenditures in that years as well as for dividends, this resulted in a loss in that year. However in subsequent years, the business was able to meet these costs and I have some money to spare thus increasing its potential for growth opportunities.
Cash Flow Generated from Financing Activities
The company cash flow statement from Financing activities has steadily grown from the year ended in June 2002, where figures where in negatives to 179 and 4707 in 2004 in the issuance of stock. This represents marked growth in the financing activities. The company is receiving a lot of money from financing activities and points to its growing strength and financial stability in the financing area
The main cash flow from financing activities in the corporation included stocks, and borrowings. Payment of debt and purchase of treasury stick especially in 2003 represented the main expenditure from financing activities. At the end of that financial period the net cash provided by financing activities was 4707 up from (5141) in 2002. These figures are strong and indicative of the company’s financial health sufficient positive cash flow means that the company is able to pay for its investments and its debt at the same time remaining profitable. The company’s financial position places it strategically to be able to avoid liquidity risk, where it is defined as “˜the risk that the corporation will be unable to meet its obligations associated with its financial liabilities’ (Al Hilal Group, 2012).
Analysis of Cash Flow from Investing Activities
Candela Corporation in the period under review did not make any receipts in the investing activities area. Instead there is continuous outflow of cash going towards purchase of plants, properties and equipment. This figure starts from 1058 in 2002, peaks at 1227 in 2003 and gradually drops to 685 in the year ended July 2004. This means it spend less money in the purchase of property and equipment in the third years as it became increasingly stable and as equipment bought was sufficient to run its businesses. The overall weight of investment decreased.
The cash flow statement is able to present a clear picture of the cash flow activities .it shows how money flowed in and out of the business in the given period as opposed t a balance sheet which would just show a list of the corporation’s assets and liabilities and present owner’s equity. It is also possible to determine the trend of cash flow from Candela Corporation for a given duration or accounting period as opposed to on e year as would be shown by a balance sheet or income statement(Al Hilal Group, 2012).. It also enables us to reflect on Candela Corporation’s ability to pay its bills in the future as it allows for a study o fits financial trend in all key areas. It does this by allowing us to see whether the company is collecting money quick enough to manage its debt service as opposed to an income statement of balance sheet which are not able to give this information.