Cash Flow Statement that features longevity characteristic

Question 1 

The Cash Flow Statement, as noted in Buffet videos, was first required in the year 1987.

Question 2 

As noted in the Buffet video, the Cash Flow Statement row that is the only part of the Cash Flow Statement that features longevity characteristic in the company cash flows operating activity section

Question 3 

Again as noted in Buffet's videos, the Cash Flow row that needs to be positive in is a stronger company is the operating activity.in the cash flow statement.

Question 4 

As noted in the videos, the Cash Flow Statement two rows that should be negative in a strong company are the financing and investing activities as provided in the cash flow statement.

Question 5 

The four companies that were under discussion in the second Buffet video include the following: Intel, Walmart, and Eastman Kodak

Out of the four companies discussed in the second Buffet video, the robust companies or best-performing companies in the discussion were Intel and Walmart.

As discussed in the second Buffet video, the two weakest companies are Eastman Kodak and Sears because of their weak cash flow statements.

Question 6 

As has been explained in the Free Cash Flow videos, companies can influence their free cash flow by increasing the length of period taken to pay the bills and, as a result, preserving the cash. They can also affect free cash flow by shortening the time it takes to gather what other companies owe them, conserving money. They can also influence their free cash flow by not buying inventory, preserving cash for the company. Holding cash here means that the company has unspent cash, which can be used in other activities or for future use.

It is necessary to note that firms have some loopholes regarding the items or may not be considered capital expenditures. Investors need to be aware of this information when comparing the free cash flow of different corporates.

Question 7 

Question 8 

Based on the 2019 Verizon annual report, the company has improved cash flows generated from its operating activities. The company recorded a 47 percent increase in cash flows from operations from 2017 to 2019. There was a 42 percent drop in the operating cash flows in 2016 due to adverse business conditions, but the recovery phase in 2017 has provided momentum, which has continued to 2019. The increase is attributed to a rise in earnings for the period, and a decline in contributions (discretionary) to the qualifying workers benefit plans, and working capital changes offset. The positive and upward trending cash flows are indicative of a company that is generating income. By being positive in its operating activities over this period, it reveals that Verizon has overall longevity.

The cash flows provided by investing activities continue to reveal the significant emphasis the company has placed on capital expenditures. Verizon has continued to place significant resources on investments expected to generate future returns as an avenue for growth. The reported capital expenditures relate to the injection of capital resources to promote new products to the market, maintain the company infrastructure, improve responsiveness to competitive challenges, and increase the networks' productivity and efficiency. The company spent a high of $5.9billion in 2017, which declined to a low of 29 million in 2019. The 2018 capital expenditures were $16,658, this increased by 7.69% to $17,939 in 2019. Verizon invested $898 million in 2019 and $1.4 billion in 2018 in wireless licenses acquisitions. The figures on net amounts spent on acquisitions show a shift in policy from acquisition-based growth to generic growth due to the diminishing investments in acquisitions. Verizon has positive investing activities over the period 2018-2019, which is a negative indicator that the company is not investing in itself or purchasing other firms of stocks or bonds.

Verizon spent a net of $15.4 billion in 2018 and $18.2 billion in 2019 in financing activities, majorly due to the impact of servicing long term debt covenants. Repayments for the long-term debt continue to consume a significant amount of the company's cash resource. Likewise, it's an indication of prudence how Verizon utilizes the huge debt capital to generate liquidity. The financial statements show a wave-like turned in the number of long-term borrowings from 2015. In 2017, the company acquired $27 billion in long term debt from a low of $6.7 billion. However, though the amounts reduced in 2018, the trend started to rise again in 2019 by over 50 percent. Verizon has managed to keep its shareholders happy through the payment of constant dividends. Dividends paid has grown by 17 per cent over the years from 2015 to 2019 as indication of the strong commitment the company's management has on returning to its stockholders. On the flip side, the net financing activities are negative, signifying the company is experiencing more cash outflows than inflows on a segment supposed to generate more than it pays out, mainly due to the debt payment commitments and payment of dividends.

The positive free cash flows follow a similar trend as the net cash flows from operating activities. A strong recovery follows a steep decline in free cash flows in 2016, and the company has continued to generate growing operating cash flows each year since then. With capital expenditures remaining constant, the free cash flows have grown tremendously, from $5billion in 2017 to $17 billion in 2019. Verizon Inc. has good financial health as indicated by the growth in free cash flows and the rising cash flows from operating activities. Its management follows a policy of growth and pursuit of operational efficiencies through prudent employment of debt.

References 

Kousenidis, D. V. (2006). A free cash flow version of the cash flow statement: a note.  Managerial finance ,  32 (8), 645-653. 

Ketz, J. E. (2016). Free Cash Flow and Business Combinations.  The CPA Journal ,  86 (11), 48-53.