Cash Flow Analsyis

Operating Activities

PnP reports cash flow from operating activities using the direct method, whereby major classes of gross cash receipts and gross payments are disclosed. There has been an increase in the year 2012 in regards to cash flow from operating activities. The increase of net cash from R17.4 to R1228.8 mil indicates that there is more economic inflow even though profits have decreased from R784.4 in to 2011 to R681.4 in 2012 as reflected on the statements of comprehensive income. This increase is cash indicates that that PnP is self-sufficient in funding its daily operations internally.

PnP will be able to finance its future expansion internally without borrowing or issues external stock. This is based on the positive 2012 results as more cash was generated, thus suggesting there`s more resources to distribute. This is also dependent on the expansion capacity to be incurred. Furthermore, the cash flow statement reflects there is reasonable assurance up to R1.2 billion that PnP can fund capital project without borrowing.

Dividends paid out depend on the planned future expansion as those may be funded internally. It also depends how much the PnP wants to keep in the returned earnings for security purposes or future investment opportunities. As much as PnP is profitable the resources distributed have decreased in the current year in comparison to 2011. The decrease in dividend paid out is not a concern in terms of security, however it is expected. To add, it is reflected that the net cash has increased in the current year and there is no increase in the number or shareholders as reflected in Statement of Financial Position therefore dividend is secured.

Finally, investors would prefer investing in a company with a positive cash flow from operations of which Pick n Pay has R 1228.4 net cash generated from operations. It increased from 17.4 to 1228.4, this too offers preview of changes in net future income.

Investing Activities

Investing...