Free «Cash Flow Statements» Essay Sample

Cash Flow Statements

Financing activities are the activities the organization uses to pay for its growth (Helfert, 2001). The profit paid on Tier 1 Sukuk to refers to gains made from investment in medium term Sukuk listed in the London Stock Exchange. Sukuk refers to certificates which are equal in value and represent common shares (ADIB, 2010). There was a 100% increase in profits from this investment up from 2009. This was a good change as it showed an increase in gains that resulted in an increase in owner’s equity.

The proceeds from issuance of Tier 1 Sukuk refer to income gained from issuance shares. Tier 1 describes the capital adequacy of a bank in terms of core capital, equity capital and disclosed reserves (Investopedia, 2012).There was a -100% change in the proceeds, meaning that the 2009 proceeds were from issuance of the initial offer. This change was not expected to contribute to the profitability of the bank in 2010.

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Proceeds from the issuance of Sukuk (second issue) refer to the income gained by the bank for issuing the share certificates for the 2nd time. A secondary issue is defined by Investopedia (2012) as “issuance of new stock for public sale from a company that has already made its initial public offering ….to refinance, or raise capital for growth”. There was a 0% change in the proceeds, meaning that the 2010 could not be compared with 2009 since the issue occurred only in 2010.

Repurchase of Sukuk (second issue) refers to the cost of repurchasing some of the bank’s own shares from the market place equity holders to reduce number of outstanding shares in the market. A repurchase results in an increase in the company’s earnings per share, as well as an increase in the market value of the remaining shares (Investopedia, 2012).

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Dividends paid show the amount of the profits that were paid to shareholders. There was a -99 % change in dividends paid meaning the shareholders earned less on their investment. This is possibly due to the cost of issuance of the second issue and financing of growth.

The dividends paid to charity were the amount of profits donated to charity. There was 0% change in the amount donated, indicating that the firm is committed to corporate social responsibility despite performance its annual performance. This ethical consideration in corporate strategy gives the organization a positive public image that results in customer loyalty and ultimately, profitability of the firm.

Net cash from financing activities refers to the total cash less expenditure from financial activities, a measure of the flow of cash between a firm and its owners and creditors. There was a 54.5 % change in net cash from financing activities. This is good as it indicates an increase in revenues hence an increase in returns.

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Increase in cash and cash equivalents refer to the increase in liquid and more liquid current assets such as Treasury bills, bank accounts and marketable securities. There was a 17.5% change in cash and cash equivalents, indicating an increase in current assets and therefore, an increase in organization wealth.

Cash and cash equivalents at 1 January refers to monetary and other money related assets as at 1st January that are cash or can be converted into cash at the beginning the year. There was a 73.4 % increase in over 2009 meaning that 2010 began the year with better cash flows.

Cash and cash equivalents at 31 December are monetary and other money related assets as at 31st December that are cash or can be converted into cash at the end of year. There was a 49.7 % increase in cash and cash equivalents at the end of 2010 over 2009 meaning that in 2010 the bank performed better than in 2009 and would be beginning 2011 on a more positive footing than it had in 2010.

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