Cash Flow Analysis

Operating Cash Flow

A measure of the amount of cash generated by a company’s normal business operations. Operating cash flow is important because it indicates whether a company is able to generate sufficient positive cash flow to maintain and grow its operations, or whether it may require external financing.

Investing Cash Flow

Positive: Cash return from investment activities

  • Disposal of Plant & Equipment
  • Disposal of investments
  • Dividends received from investments

Negative: Cash used in capital expenditures such as buy properties, factory expansion etc.

  • Purchase of Plant & Equipment
  • Purchase of shares and intangible assets

Financing Cash Flow

Positive:

  • Proceeds from debt
  • Proceeds from equity issues (ordinary shares/rights)
  • Disposal of investments

Negative:

  • Repayment of debt
  • Payment of interest
  • Payment of dividends

Remarks: Above are general assessments of cash flow health. There may be circumstances where companies in growth phase would require it to invest in new plants and has to obtain financing for expansion purpose.

Sembcorp Marine

Sembcorp Marine’s market share in the marine industry is severely impacted by the 60% fall in oil prices in the last 18 months.

  • Cash flow from Operations went from nearly $1 billion for FY2013 to negative $827.9 million for FY2015.
  • Cash and Cash Equivalents dipped from $1.7 billion as at FYE2013 to $627.3 million as at FYE2015.
  • Long Term Debt rose 8 times from $300 million as at FYE2012 to $2.5 billion as at FYE2015.

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Disclaimer:

The mentioned stock should not be taken as an advice to buy or sell. Each user should go through with his usual self-analysis of his risk appetite and perform additional due diligence before making any investment or trading decision. Your Trading Representative should be consulted before making any financial decision.

 

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