Selected information (CAD millions) are presented for two firms ROP and DUL , op
ID: 2583255 • Letter: S
Question
Selected information (CAD millions) are presented for two firms ROP and DUL, operating in the same industries:
DUL
ROH
Net income
$ 4,529
$ 161
Net cash provided by operating activities
6,539
212
Net cash provided (used) by investing activities
(1,420)
35
Net cash provided (used) by financing activities
735
(176)
Net increase in cash and cash equivalents
$ 5,854
$ 71
Cash and cash equivalents, beginning of year
$ 2,078
$ 267
Cash and cash equivalents, end of year
$ 7,932
$ 338
Required:
i) Compare and discuss the performance / activity the two companies based on the above Cash Flow and Net Income information.
ii) Which company appears to be in a stronger Cash position? Why?
DUL
ROH
Net income
$ 4,529
$ 161
Net cash provided by operating activities
6,539
212
Net cash provided (used) by investing activities
(1,420)
35
Net cash provided (used) by financing activities
735
(176)
Net increase in cash and cash equivalents
$ 5,854
$ 71
Cash and cash equivalents, beginning of year
$ 2,078
$ 267
Cash and cash equivalents, end of year
$ 7,932
$ 338
Explanation / Answer
In terms of Performance DUL has performed very good in comparison to ROH as their Net Income is more ROH.
DUL has performed very well as their Cash from operating Activities is much much more than of ROH which represents DUL is earning a lot of income through their Operating activities which is good for the company and from Investors point of view, which also represents Good Financial condition and good future Growth.
DUL has utilized their profit in good way by investing the profit in Long Term Assets which will help the company to generate more revenue in the future and will help to generate more profit.
Irrespective of lot of Cash and income DUL has raised its finance which is bad as it is growing the debt of the company irrespective of the fact that they has the resources but in this field ROH has done good work by reducing the debt of the company which will leave more profit to the shareholders.
DUL is considered to be in Stronger Cash position as they have good profit and have a good cash reserve for any future uncertainty and for expansion.
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