The following case involves financial analysis of Activision Blizzard, Inc. ("Activision" or "the Company"). Activision has its corporate headquarters in California, it is listed on the NASDAQ, and it is a worldwide publisher of the online, personal computer, video game console, handheld, mobile and tablet games. This case involves the analysis of Activision's business strategy, accounting policy, and financial performance. 

Required:

Address the following questions based on your evaluation of the Form 10-Ks for Activision for the five years ended December 31, 2020. Begin your analysis with the spreadsheet posted online containing the raw data associated with the financial statement information (file entitled "Discussion Case - FSA (data)"). Cash Flows This part will ask you to perform a detailed analysis of Activision's cash flows for the year ended December 31, 2020, and a summary analysis of Activision's cash flows for the five-year period ended December 31, 2020.

▪ For the year ended December 31, 2020, identify material differences between reported operating cash flow and sustainable operating cash flow, if any. Also, in your team's opinion, how strong is Activision's sustainable cash flow from operations and its sustainable free cash flow? [Note: Operating cash flow is affected by income from operations and the adjustments for non-cash revenue and expense, but operating cash flow is also affected by the change in operating assets and liabilities (e.g., accounts receivable, inventory, accounts payable, etc.). Cash may be increased, for example, by the collection of accounts receivable - in excess of current year sales - or by not paying accounts payable. If, for example, the cash generated from not paying accounts payable is considered excessive, or not normal, or not sustainable (i.e., the company must pay accounts payable eventually and the current year adjustment is far in excess of what could be considered normal), you will need to adjust operating cash flow to remove the excess amount related to accounts payable. The adjusted operating cash flow is sustainable operating cash flow.]

▪ Develop an overall summary of the key elements of Activision's investing and financing cash flows for the year ended December 31, 2020. This is less about calculating the numbers and more about analyzing and evaluating what the numbers tell you, and the conclusions you can reach from the financial statements.

▪ Discuss the overall trends in Activision's cash flows for the five years ended December 31, 2020. Operating Cycle This part will ask you to perform a detailed analysis of Activision's operating cycle for the five-year period ended December 31, 2020. 

▪ Using the Commonly Used Ratios (see the file "Discussion Case - FSA (Ratios)"), calculate the Operating Cycle ratios for each of the five years ended December 31, 2020.

▪ Discuss the overall trends over the five-year period in terms of how the Company has managed its operating cycle. Address how the Company has managed its operating cycle 2 through periods of growth or decline. Also, address how the Company's strategy is reflected in its operating cycle. This discussion should be focused on analyzing and evaluating what the numbers tell you, and the conclusions you can reach from the financial statements.

Answer rating: 100% (QA)

Consolidated Statements of Operations For the Year Ended December 31 2015 Dollars in millions 2015 2... View the full answer