Relation between net income, EBITDA, and cash flow from operations
Selected data for The Walt Disney Company appear below (in millions).
|
|
Year 4
|
Year 3
|
Year 2
|
Year 1
|
|
Net income
|
, $2,345
|
$1,267
|
$1,236
|
$1,169
|
|
Conversion of net income to cash flow from operations:
|
|
|
|
|
|
Non-working capital adjustments
|
2,076
|
1,370
|
1,077
|
2,124
|
|
Working capital adjustments
|
(51)
|
264
|
(27)
|
(245)
|
|
Cash flow from operations
|
$4,370
|
$2,901
|
$2,286
|
$3,048
|
|
EBITDA
|
$5,554
|
$4,106
|
$3,919
|
$3,759
|
|
Growth rate in revenues
|
13.6%
|
6.8%
|
0.6%
|
(0.6%)
|
Examine the differences between net income, cash flow from operations, and EBITDA for The Walt Disney Company. Comment on the relations among these series over time. Why does cash flow from operations exceed net income? What adjustments contribute to this pattern? Is this typical or unusual? Why is EBITDA so much higher than both net income and cash flow from operations?
INTERPRETING THE STATEMENT OF CASH FLOWS.
The Coca-Cola Company (Coca-Cola), like PepsiCo, manufactures and markets a variety of beverages. Exhibit 3.22 presents otatement of cash flows for Coca-Cola for 2006 to 2008.
Required
Discuss the relationship between net income and cash flow from operations and between cash flows korri operating, investing, and financing activities for the firm over the three year period. Identify characteristics of Coca-Cola's cash flows that you would expect for a mature company.
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