Growth and Mature – Further Analysis Issues
Those readers who are employed as professional analysts typically spend most of their time analysing growth and mature businesses simply because they represent the majority of the business entities out there!
For this reason we will now introduce certain other cash flow analysis techniques of importance when looking at these types of business. These are the nature of net working assets and their behaviour, and the restatement of the Jury’s Template cash flows on a no-growth basis.
Understanding both these concepts provides analysts and others with further tools to aid comprehension of the performance of the growth and mature businesses being analysed.
ANALYSING NET WORKING ASSETS FROM A CASH FLOW VIEWPOINT
The periodic changes in the amounts invested in net working assets can provide much useful information to the analyst. This is because the control of net working assets is one of the most important challenges for the management of any business.
Secondly, different sectors of the economy enjoy completely different patterns of working asset investment. In Chapter 1 we contrasted the major supermarket group Tesco with civil aircraft manufacturer Airbus Industrie to illustrate this.
Let us consider this further. Table 8.1 shows the cash flows of Tesco plc for a six year period summarised in Jury’s Cash Flow Template format.
Tesco’s overall cash flow performance is spectacular, ...