Analyze the cash for Bed Bath Beyond httpwwwnasdaqcomsymbol

Analyze the cash for Bed Bath & Beyond.

http://www.nasdaq.com/symbol/bbby/financials?query=cash-flow

Answer the following quesions: What are the Cash and Cash Equivalent balances and the Cash Flow from Operations? Is there a cash burn? What does the company management believe to be their cash position? Do you agree with the company management?
Looking at: Cash Flow from Operating Activities Expected Dividends Expected Capital Spending,
Do you expect the company to require additional financing?

Solution

Cash and cash equivalent is the component of Current Assets of the Balance Sheet which can be readily converted in a known value of cash. The balances includes:

Cash - bank accounts, petty cash accounts, coins, currency notes, money order.

Cash equivalents - marketable securities, treasury bills, commercial paper, short term government bonds with a maturity of 3 months or less.

Cash flows are the transactions which changes the position of Cash and cash equivalent balances. Cash Flow from Operations tells about the cash generated by the business from regular or day-to-day activities like sales of goods and services. They do not include any cash generated from financing and investing activities. It indicates if the company is able to generate sufficient cash to maintain and grow its operations. They are calculated as:

Cash Flow from Operations = Earnings before interest and tax + Depreciation - taxes +/- Change in working capital

Cash Burn is a measure of negative cashflow from the business operations. Looking at the annual Cash Flow statement of Bed Bath and Beyond, the cash generated from operations is over $1 billion. There is a slight decline in cash from operations over the past 4 years but positive. It clearly indicates that the company is able to maintain the business operations. Overall there is a decline in cash and cash equivalents but the cash generated from operations is positive. So, there is no cash burn.

Company management seems to be fine with the current position of cash. It is evident from the fact that the company is paying quarterly dividents inspite of the decline in the cash and cash equivalent balance in the last two years. Not only they are paying dividends, the payment has increase too from $0.125 to $0.15 in 2017. the dividend yield increased from around 1% in 2016 to 2% in 2017.

The position of cash is not so bad currently. The percentage of cash of the total assets is around 7% which is decent. But, few more points needs to be noted here:

Short term investments have reduced to zero which was $86 million

Current liabilities have been increasing on an annual basis.

Quick ratio and cash ratio shows a declining trend.

After considering all the factors, we can sy that the company is not in a bad position currently but it needs to keep an eye on the declining cash trend over the past few years and take appropriate measure to ensure that the company is up and running for the long term.

In order to identify if the company needs additional financing, Cash flow from Operations is the most important criteria. As mentioned earlier, Cash flow from Operations indicates if the company is able to generate sufficient cash in order to run maintain and grow its business. If it is not able to generate cash from operations, then it may require external financing for capital expansion. The company is generating over $1 billion from business operations and hence does not require any additional financing currently.