China Petroleum & Chemical Corporation (known as €˜Sinopec€™), introduced in Chapter 15, is an integrated energy and chemical company. The principal operations of Sinopec Corp. and its subsidiaries include:
€¢ Exploring for and developing, producing and trading crude oil and natural gas
€¢ Processing crude oil into refined oil products, producing refined oil products and trading, transporting, distributing and marketing refined oil products
€¢ Producing, distributing and trading petrochemical products.
Sinopec reports two sets of financial statements: one in accordance with Chinese GAAP (China Accounting Standards for Business Enterprises) and another one following IFRS. In this assignment, we use the first set of financial statements.7
Below are the statements of cash flows of the group for the years ended on 31 December 2008 to 2011 (Source: Annual reports 2009€“2011).

The Notes to the financial statements include some €˜supplemental information to the statement of cash flows€™.

From the consolidated financial statements, the following additional data was collected:

Required
Step one: Understanding
1. What is the method used to compute the cash flow from operating activities?
2. What does the Note represent? How useful is it to users of financial information?
3. Compute the potential cash flow (see this concept in Chapter 14).
Step two: Analyzing
Analyze the statement of cash flows over the period. You can use the additional information provided in the above table (Source: Annual reports 2009€“2011).

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Statement of cash flows RMB millions 2011 2010 Cash flows from operating activities: Cash reoeived from sale of goods and rendering of services Rentals received Grants received Other cash received relating to operating activities Sub-total of cash inflows Cash paid for goods and services Cash paid for operating leases Cash paid to and for employees Value added tax paid Income tax paid Taxes paid other than value added tax and income tax Other cash paid relating tooperating activities Sub-total of cash outflows Net cash inflow from operating activities Cash flows from investing activities: Cash received from disposal of investments DiMdends received Net cash received from disposal of fixed assets and intangible assets Cash reoeived on maturity of time deposits with financial institutions Cash reoeived from derivative financial instruments Other cash received relating to investing actimties Sub-total of cash inflows Cash paid for acquistion of fixed assets and intangible assets Cash paid for acquisition of fixed assets and intangible assets of jointly 2,889,482 2,215,212 1,550,786 1,717,060 388 0 53,705 12,316 8,279 2,902,235 2,223,883 1,558,655 1,775,994 (2,398,623) 1,758,556 1,155,786) 1,544, 176) (12,611)12,414) 41,718)(30,754) 29, 182)(27,773) (71,311)(63,125 41,166(35,538) (6,045(21,072) 176474)154,716 33,859)(48,246) (29,798)14,158 (20,519) 18,898 (2,751,054 (2,052621) 1,392,646) 1,701,111) 151,181171,262 166,009 74,883 2,961 3,626 4,646 1,358 3,253 7,679 0 18,862 142,813)(114,711 116,789) 108,575) 28,099 controled entities Cash paid for acquisition of investments Cash paid for acquision of time deposits with financial institutions Cash paid for derivative financial instruments Cash paid for acquistion of subsidiaries and minority interests, net Cash paid for acquiston of subsidiaries Sub-total of cash outflows Net cash outflow from investing activities Cash flows from financing activities: Cash received from borrowings Cash received from issuance of convertible bonds, net of issuin (11,3103,240) 3,089) (2,304) (5,801) (3,768) (3,522 (5,273 0 (159,870 (134,816) 125,530) (113,704 (141,008 (106,717) 117,851 (106,250) 0 536,397 663,491 781,2121,147,279 29,850 22,889 0 expense Cash received from issuance of corporate bonds Cash received from issuance of share Cash received from contribution from minority shareholders of 61,000 0 15,000 0 0 408 564,403684,901 82,926 1,193,266 (532,667 (672,804) (850,683) (1,125,333) (6,036)(31,000)15,000) 10,000) Sub-total of cash inflows Cash repayments of borrowings Repayments of corporate bonds Cash paid for acquisition of minority interests from subsidiaries, net Cash paid for dividends, profits distribution or interest DiMdends paid to minority shareholders of subsidiaries Distributons to Sinopec Group Compamy Sub-total of cash outflows Net cash inflow/(outflow) from financing activities Effects of changes in Net (decreaseVincrease in cash and cash equivalents (26,368)(23,130(21,321) 23,651) (1,051) | (566,919丨 (741,195)丨 (5,294)| (889,337)| (46,411)| (1,162,568) 30,698 (2,516)| 7,639 1,742 (748) Note 47(a) -Reconciliation of net profit to cash flows from operating activities RMB millions Net profit 2011 2010 2009 2008 Add: Impairment losses on assets Depreciation of fixed assets Amortization of intangible assets Dry hole costs written off Net gain on disposal of non-curent assets Fair value (gain)loss Financial expenses Investment income Decrease (increase) in deferred tax assets Increase/(decrease) in deferred tax liabilites Decrease/(increase) in inveritones Decrease/(increase) in operating receivables Decreaseincrease in operating payables Net cash fow from operating activities 76,86476,843 66,521 26,115 5,811 15,445 7,453 16,617 62,255 57,974 53,04445,012 841 5,9794,98 4,761 4,236 (754) (253) (211)(248) 365 (3,969) 6,544 6,8477,2488,723 (4,186) (5,671(3,589)(980) 2,430 1,853)(206) (2,377) 246 5,310 1,080(337) (50,013) 15,828) (45,822 12,336 (6,479) (38,148) 33 12,284 72,346 64,152 67,010(43,370) 151,181 171,262 166,009 74,883 1,561 1,279 1002 (1,423) 179 2 RMB millions 2011 2010 2009 2008 Income from principal operations (sales) Net profit (from the income statement) Current liabilities Total liabilites 2,505,683 1,913,182 1,345,0521,420,321 26,115 234,050 363,075 76,864 66,521 76,843 429,073325,627 243,380 620,528 532,707 405,078