Sample Essay

The cash flow from operating activities is more useful and relevant for both companies for evaluation purposes. The net income presents an amount in the income statement which is based on estimates and use of several noncash expenses such as goodwill and amortization. The net income of a company can be manipulated by using different accounting policies and procedures. The cash flow from operating activities on the other hand is an actual account of cash received or paid from operations of a company. This information is less vulnerable to manipulation and provides a more realistic position of a company.

The values of sales and net income have been predicted for Unilever using horizontal trend analysis. The sales for 2009 for Unilever is predicted to be €40,971 million for 2009 at an average growth rate of 1.11 percent and net income for 2009 is predicted to be €5,425 million based on an average growth rate of 2.66 percent. The company is focusing on increasing the cash inflows on a short term basis and increasing shareholder value on a long term basis. We can predict from this policy that cash flow positions of the company will depict growth in the next few years while a stable growth is predicted in the net earnings on a long term period (Unilever, 2008).

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