As a rule, one should look at cash flow statement, as” if the cash obtained from operating activities is greater than the derived net income, company is in a healthy position, but if it is reported otherwise, something is wrong, and management should be concerned on this. (Accounting Coach)
It is different for investors because for investors more cash coming in means increases in dividends, opportunities for expansions, and payment of debts, and would improve stockholders value.
Apple's Cash Flow
Review the cash flow statement for Apple. How would you summarize Apple’s cash flow position and what does this statement tell you about where the money is coming from and where it’s going? What should Apple do to improve its cash position and why?
A review of the yearly cash flow statement of AAPL from 2010 to 2012 shows that the cash used for operating have been larger than the reported income so it is assumed that some strategies of the company are not attuned with the operations and investing activities. (Yahoo Finance, 2013) For instance, a lot of cash are tied up in accounts receivables and in heavy investments. AAPL cash flow states Investors are happy since dividends are paid regularly and obligations are met as they fell due.
What should Apple due to improve its cash position? Since cash position has been low for the past 3 years of operation, a review of company’s strategies should be done, more so in operational strategies. For instance, heavy accounts receivables means creditors are enjoying too much liberal credit facilities, or management needs to slow down on investments. ...