Cash Flow Statement tells how much cash generated by a company during a specific time frame like a quarter or a year. Cash is vital and a firm need to generate enough cash to survive. Performing Cash Flow Statement Analysis can help us to determine how the cash was generated and spent.


Net Income (NI) vs Operating Cash Flow (OCF)

 

We can see that the OCF is above the net income most of the time and this mean the company generated adequate OCF to cover all operating expenses. This is a good sign as the net income is coverted to the cash. 

In year 2012, the OCF is 50.2m while the NI is 13.7M, however in year 2013, the OCF is 18.5M and the net income is 15M. The year 2012's OCF is 365% of its net income and it is much better than year 2013 where the OCF is only 122% of its net income. In year 2012, the huge OCF is contributed by the decrease of receivables and it mean the firm is able to collect the receivable efficiently.

Capital Allocation and Earning Quality

The revenue was growing from 107.7M to 289.9M and it is equivalent to a 169% growth rate. The growth was achieved by a total of 222.8M of capex  and the average CAPEX is 14.73% of the revenue.

The FCF on year 2013 is equivalent to 1.7% and 0.83% of revenue and invested capital, and the average FCF/Revenue and FCF/IC is  -3.8% and -1.8% respectively. This shows that the growth quality and earning quality is bad.


How LONBISC being financed?
 

Most of the time, the CAPEX is great than the OCF. It mean that the firm not able to generate enough cash from its operating activities to meet its capex requirement. Owing to this, we can see the firm is getting fund from sharehodler via issuance of shares.

Eventhought the shareholder pay more cash to the company, but the investment not able to provide a good yield to its shareholder in view of the average FCF/Revenue and FCF/IC is negative which is  -3.8% and -1.8% respectively.



Free Cash Flow

Free Cash Flow (FCF) measures how much cash was generated that can be spent at management's discretion. This excess cash can be used to enrich SH or invest in new opportunities for business without hurting the existing operations. It is one of the most important figures to determine the company capability to enrich its shareholders. With the FCF, the firm can  (1)retire debt (2) repurchase shares (3) pay additional dividends and (4) create new products or expand current offerings. 

LONBISC's FCF is very bad. It have a negative FCF on year 2011 and 2012. The FCF on the latest FY is 4.9M which is only equivalent to 1.7% and 0.83% of revenue and invested capital. 

Based on the pass records, it is not suprise that LONBISC might need to generate more cash from financing activities (either from owners or creditors) to support it's cash flow.



References:-

• Cash Flow Statement Analysis