Question

ExxonMobil needs to analyze its Cash Flow from 2020 through 2022. Cash Flow analyzes the company's cash flow statement. Your analysis should include an overview of the statement of cash flow, an analysis of the cash flows from operating, investing, and financing activities, and the change in cash and cash equivalents for each year? How have these numbers changed over the three years, and what could be some reasons why these numbers have changed the way they have.

Answer 1

ExxonMobil's cash flow statement comprises operating, investing, and financing activities that showcase the company's financial health over the years. Changes in these cash flows can indicate shifts in business strategies, market conditions, capital investments, or international trade dynamics.

Step-by-step explanation:

ExxonMobil's cash flow statement is a financial document that tracks the cash generated and used during a specific period. This statement is divided into cash flows from operating, investing, and financing activities. Analyzing these sections helps in understanding the company's liquidity and financial health over time.

Cash flows from operating activities are the cash transactions related to the company's core business operations. In ExxonMobil's case, an increase in these cash flows could indicate improved revenue from the sale of oil, gas, and petrochemical products. A decrease might be due to lowered demand, price fluctuations, or increased production costs.

Investing activities typically involve purchasing or disposing of long-term assets. Reinvesting in new technologies or other companies through mergers and acquisitions can be seen here. Changes in this section may reflect strategic decisions to expand or restructure ExxonMobil's asset portfolio.

Lastly, cash flows from financing activities reflect how a company funds its operations and growth. This could include issuing stock, paying dividends, or obtaining loans. Fluctuations here might result from changes in dividend policies, stock buybacks, or variations in debt financing.

The change in cash and cash equivalents represents the net increase or decrease in cash as a result of the year's activities. Several factors may influence the change, including the company's operations efficiency, investment strategies, and financing decisions in response to the capital markets.

International transactions, such as exports, imports, and financial investments, could also impact the cash flow statement. For instance, increased foreign investment in ExxonMobil may manifest as inflows in the financing section, while trade deficits can affect operating cash flows.