Cash Flow Statement

Cash flow statement

Cash from operating activities

Net cash from operating activities(CFO) for TMC increased from 1452,435 million Yen in 2012 to 4,460,857 million Yen in 2016, nearly tripled over the five years. Although net income had grown 6 times but doubtful accounts losses has grown to 16 times, resulting in net increase in CFO of only thrice as compared to net income. This extraordinary increase in net income is due to fact that initial year value of net income is very low as operating expenses were almost on par. But gradually expenses were realized and net profit started increasing. So, to control and maximize cash from operating activities, TMC should monitor its doubtful accounts and credit losses.

Cash from investing activities

Net cash from investing activities(CFI) for TMC decreased from 1,442,658 million Yen in 2012 to 3,182,544 million Yen in 2016. This decrease is mainly due to cash lost in additions to finance receivables which is increasing in negative over the years and ultimately cancelling the cash coming from collection of and proceeds from sales of finance receivables. These are the two major attributes of CFI, so to increase cash from investing activities, TMC should try to decrease value of addition to finance receivables. Along with these there is an increase in investment to purchase fixed assets (cash outflow) that can be verified from balanced sheet.

Cash from finance activities 

Net cash from financing activities (CFF) for TMC decreased from 355,347 million Yen (-ve means cash outflow) in 2012 to 423,571 million Yen in 2016. During this five years, there is gradual increase in payment towards long term debt with issuance of long term debt nearly doubled at the end of 2016. In addition to this there is an increase in dividend paid to shareholders which nearly became 4 times of its initial dividends paid in 2012.

OPERATING & FINANCIAL STRENGHTS AND WEAKNESS

 Financial Strength

Although debt to asset ratio taken average for 5 years is less for HMC. But TMC has shown improvement and its ratio is decreasing as per trend. Current cash debt coverage is also better for TMC as compared to HMC with its stability concentrated over 5 years.

Increasing dividend pay-out to its shareholders is also a good sign and shows positivity abut its future prospects

 Financial Weaknesses

A negative financial cash flow is indicative of the firm reaching a matured stage. However, to be

projected as a continuously growing firm a positive cash flow in financial activities is favored as it

creates more opportunities for growth. Also, financial slack is lower than HMC for TMC which is also a concern.

 Operational Strength

The net profit margin has been increasing with a fair pace for TMC (5.3%) as compared to HMC (1.7%). Steep increase in net profit of TMC is due to its abilty to control its operational expenses while increasing sales. Return on Asset is also moderately good for TMC (5.13%) as compared to HMC. The cash flow from operational activities for TMC has been steadily increasing over the past 5 years. The cash from investment activities too showing an optimistic trend resulting in an increase in total cash in 2016.

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