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One of the main reasons ensuring a decent business activity of a company is
that it has enough amount of cash on its balance which can be estimated by cash flow
analysis. Its major purpose is to reveal the cause of cash excess or shortcoming, de-
termine the source of its incoming and the direction of usage. Cash flows are usually
considered in terms of three types of activity: operating, investing and financing. This
separation helps define the share of income from each activity. This kind of analysis
makes it easier to evaluate future prospects of a company.
What makes cash flow analysis complex is the process of determining how
much money should remain on a company’s balance as a reserve and how much
should be spend in order to get some extra benefit by investing. So, figuring out a
right balance between these two options should be one of the primary objectives of
the company.
In this work we will be analyzing a cash flow statement of PJSC «Magnit».
«Magni» – one of the best performing retailers in Russia.
«Magnit» operates for most satisfaction of the client’s needs, offering them
high quality goods at fair prices. The company is orientated toward the customers
with different level of personal income and for that reason runs its business by four
types of stores: convenience stores, hypermarkets, magnit Family, drogerie stores.
«Magnit» holds the first place by the number of groceries and the territory of
their placement. On September 30, 2016, the company had 13 364 stores including
10 138 convenience stores, 228 hypermarkets, 179 magnit Family and 2819 drogerie
stores.
PJSC «Magnit» cash flows provided by operating activities are presented in ta-
ble 1.
Table 1
Cash flows from operating activities of PJSC «Magnit»:
Indicators
Output cash flows, thousand $
Increase rate, %
2013
2014
2015
2014/2013 2015/2014
2015/2013
Cost of sales
13 012 807 14 132 806 11 151 836 8,61
-21,09
-14,30
Selling expenses
176 972
231 954
207 612
31,07
-10,49
17,31
General and administrative expenses
3 462 342
3 716 842
2 883 839
7,35
-22,41
-16,71
Finance costs
156 036
172 974
194 986
10,86
12,73
24,96
Other expenses
11 752
15 060
13 838
28,15
-8,11
17,75
Foreign exchange loss
11 022
73 245
43 194
564,53
-41,03
291,89
Income tax expense
318 189
373 245
199 067
17,30
-46,67
-37,44
Net cash used in operating activities
1 118 448
1 241 118
968 885
10,97
-21,93
-13,37
Indicators
Input cash flows, thousand $
Increase rate, %
2013
2014
2015
2014/2013
2015/2014
2015/2013
Revenue
18 201 924 19 872 292
15 594 588
9,18
-21,53
-14,32
Investment
income
5 859
9 695
3 702
65,47
-61,82
-36,82
Other in-
come
59 785
75 257
64 967
25,88
-13,67
8,67