CASE 10 KELLY ENTERPRISES INC STATEMENT OF CASH FLOWS FOR TH

CASE 10 KELLY ENTERPRISES, INC. STATEMENT OF CASH FLOWS FOR THE PERIOD ENDED DECEMBER 31, 2014 2014 IN MILLIONS Cash from Operations Net income Change in accounts receivable Change in accounts payable Change in inventory Depreciation Net cash from operations Cash from Investing Additions to property, plant, and equipment Proceeds from sale of securities Net cash from investing Cash from Financing Borrowings of long-term debt Cash dividends Net cash from financing Increase (decrease) in cash 2013 2012 $900 (706) 150 (50) 105 $ 499 $450 25 90 25 65 655 $ 800 (230) 15 90 $ 690 (950) 25 (925 (690) 56 $ (634 $(790) 15 (150) 85 $ 65 121 $ 250 S 34 (45) $ 110 (316 $(131

Solution

Redflags,

Though the Company has doubled the net income from $450 in 2012 to $ 900 in 2014, there is s signification decrease in net cash -almost 2.4 times decrese in 2014

Red Flags

1. Increase in Bank Loans, significant part being used to pay cash dividend

2. Heavy Investment in property , plant and equipment. Though investment is more in 2014 as compared to 2013, the increase in net income is only from $800 to $ 900,indicating surplus capacity built up

3. Significaant increase in accounts receivable, indicating tight cash flow position , forcing the company to borrow long term debt and hence finance cost in subsequent years. Likely hood of bad debts since receivables have increased both in 2013 and 2014