Financial Education

The financing activities section is always presented in direct format. AT&T’s cash flow from financing activities section is reproduced below.

In 2006 AT&T increased its short-term borrowings by $3.6 billion and issued new long-term debt of $1.5 billion while repaying $4.2 billion in existing long-term debt. The total debt (other than that acquired when the company purchased other companies) increased by nearly $1 billion and shifted from longer-term to shorter maturities. Typically, investors will feel more comfortable with long-term debt than an equal amount of short-term debt because the earlier debt maturities can prevent some companies from having cash available for other activities. In AT&T’s case, however, with overall strong cash flows and ready access to credit markets this is unlikely to be a concern.

AT&T also used $2.7 billion of cash to repurchase shares, which were put into the treasury shares account. Some of these ($589 million) were reissued – probably (though not necessarily) through an incentive stock option program. Such programs contributed an $18 million tax benefit in 2006. In 2005, the company also repurchased preferred shares of a subsidiary.

The other major financing cash flow for AT&T was dividend payments to shareholders, which consumed $5.2 billion in cash in 2006. Altogether, cash transactions with investors (both credit and equity) consumed $6.1 billion of the company’s cash for the year. This means that the company returned more cash to investors than it took in. In 2004 the opposite was the case. AT&T needed more cash than it was able to generate through operations, and it raised that cash by issuing nearly $9 billion of net short-term and long-term debt.

For more information, see all articles on: Accounting, Financial Statement Analysis, Fundamental Analysis

See also:

Cash Flows from Financing Activities

Cash Flow from Operating Activities

The Statement of Cash Flows

Cash Flow Statement – The Direct Method

Cash Flows from Investing Activities