Cash Flow Analysis Discussion Assignment

Cash Flow Analysis Discussion Assignment1. ______________ flows are essential ingredients in
______________: The value of a company today is the
present ______________ of its expected ______________
cash flows. Therefore, understanding ______________
and ______________ cash flows may help the analyst in
forecasting future cash flows and, hence determine the
value of the company, and also may aid in assessing the
ability of a firm to maintain current ______________ and
its current capital ______________ policy without relying
on external ______________.
2. The primary difficulty with ______________ a cash flow is
that it is a flow: cash flows ______________ and cash flows
______________ of the company. At any point in time
there is a stock of ______________ on hand, but it varies
among companies because of the ______________ of the
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company, the cash ______________ of the business, and
the company’s management of ______________ capital.
3. From the basic cash flow, the ______________ cash needs
are subtracted resulting in a cash flow referred to as
______________ cash flow. By restructuring the
______________ of cash flows in this way, the analyst can
see how much ______________ the company has when it
must make business ______________ that may adversely
impact the long-term financial ______________ of the
enterprise.
4. There is ______________ one correct method of
______________ free cash flow and different analysts may
arrive at different estimates for a company. The problem is
that because it is impossible to ______________ free cash
flow as dictated by the theory, so many ______________
have arisen to ______________ this cash flow.
5. The ______________ cash flow (______________) is free
cash flow less interest and other financing costs and taxes. In
this approach, free cash flow is defined as ______________
before depreciation, interest, and taxes ______________
capital expenditures. Capital ______________ encompass
all capital spending, whether for ______________ or
______________ and no changes in ______________ capital
are considered.
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Cash Flow Analysis 239
6. ______________ cash flow gives the analyst an idea of the
______________ cash flow of the company. This cash flow
measure may be useful from a(n) ______________ perspective in terms of evaluating the company’s ______________
to fund additional ______________. From a(n)
______________ perspective, net cash flow net of dividends may be an appropriate measure because this represents the cash flow that is ______________ in the
company.
7. A useful ratio to help further assess a company’s cash flow is
the cash flow to ______________ ratio, or ______________
coverage ratio. This ratio gives the analyst information
about the financial ______________ of the company and is
particularly useful for ______________ -intensive firms and
utilities. The ______________ the ratio, the ______________
the financial flexibility.
8. Another useful cash flow ratio is the cash flow to
______________ ratio where debt can be represented as
total ______________, long-term ______________, or a
debt measure that captures a specific range of maturity
(e.g., debt maturing in 5 years). This ratio gives a measure
of a company’s ______________ to meet maturing
______________ obligations, thus it is a measure of a company’s ______________ quality.
9. The analysis of cash flows provides ______________ that
can be used along with other financial data to help the
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240 QUESTIONS AND PROBLEMS
analyst assess the financial ______________ of a company.
______________ companies tend to have relatively stable
relations among the cash flows while ______________
companies exhibit declining cash flows from
______________ and financing and ______________ cash
flows for investment one and two years prior to the bankruptcy. Further, ______________ companies tend to
expend ______________ cash flows to financing sources
than they bring in during the year prior to bankruptcy