Cash Flow From Operations Growth Rates 2013-2014 2012-2013 2011-2012 2010-2011 Carnival10421.03% -5.50% -20.37 -1.36% Norwegian10533.89% 19.05% 11.76% -16.98% Carnival’s cash flow from operations decreased every year from 2010-2013. In 2014, Carnival had a large increase in cash flow from operations that brought them closer to the amount they had in 2010. This increase in cash flow from operations in 2014 was partly due to the $271 million inflow from gains on fuel derivatives. This is a huge change from the previous year’s outflow of $36 million. Receivables were also a large factor in the increasing cash flow from operations in 2014. The increase in receivables caused an outflow of cash in 2013, while the decrease of receivables caused an inflow of cash in 2014. Of all the accounts in the operating section for Carnival, net income, insurance recoverables, accrued liabilities, and customer deposits are the most material. 103Understanding Financial Statements. Ormiston, Aileen, and Lyn M. Fraser104CCL 10-‐K Document (2014-‐2012)105NCLH 10-‐K Document (2014-‐2012)
14For Carnival, the change in net income mirrors the change in cash flow from operations throughout these five years. In 2010, net income was $1.98 billion and it decreased every year until 2014, where it increased to $1.24 billion. It is evident that Carnival’s cash flow from operations shares a strong relationship with its bottom-line numbers. The biggest changes in Carnival’s operating section occur in the asset and liability accounts that involve insurance. Carnival’s large amount of insurance covers the multitude of risks it faces, including illness and injury to crew and guests, damage to ships/machinery, workers’ compensation, and liabilities for third party claims.106Therefore, the asset and liability accounts, insurance recoverables and claims reserves, respectively, carry large and inversely proportionate values. There was a steep increase in both of these accounts in 2013; this is likely due to the sinking of one of Carnival’s ships, which increased the reserve for insurance. Another significant operating activity is deposits from customers. Although this account decreased for a few years, Carnival was able to bring it back up in 2014, which helped increase cash flow from operations. Customer deposits should be monitored carefully because Carnival relies on these advanced payments to generate cash. The increase in net income and the liability account regarding customer deposits were major factors in increasing Carnival’s cash flow from operations for the first time in a few years. On the other hand, Norwegian Cruise Line starts off with a decrease in cash flow from operations from 2010-2011, but it increases at a growing rate from 2011-2014. Similar to the trend that occurs with Carnival, net income for Norwegian is a major factor in the resulting cash flow from operations from year to year. The rest of Norwegian’s operating section tells a different story. Norwegian’s balance sheet accounts stayed fairly constant, but its depreciation shaped its cash flow from operations growth. Due to Norwegian’s massive increase in property and equipment over the four years, its depreciation expense almost doubled from 2010-2014.
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