Estimating Cisco’s Future Cash Flows Case Solution & Answer

Estimating Cisco’s Future Cash Flows Case Study Solution


Cisco System Incorporation is a multinational technological company which manufactures, develops and sells high technological products and services to its ultimate users. After the implementation of multiple courses of actions; the company has achieved its agenda of having a competitive advantage over its competitors, along with the company’s long-term growth. The company is highly recognized for its specialization in high tech markets. It is a leader in the networking field all around the world. It is one of the greatest corporate success stories. In the year 1986, the company shipped its first product. This shipment had opened a room for the company to get itself introduced in the international market through holding a large market share in the industry.(Ghamat, 2016).

For the purpose of measuring the company’s success, we can measure its  current market position against its competitors. In addition to this, the company’s development in the corporate sector is focused on acquiring different companies from its field, in order to capture a larger  market share in the international market. Cisco has helped others in seizing potential opportunities. The core strength of the company is its brand name as it became renowned as a technology leader. It has mainly focused on designing or creating technology, which keeps focusing on high growth markets.

In addition to this, the company itself is going to capture the international market share, for which, the company is offering the high-quality technological products in the international market,to attract more consumers. The company is not only providing high-quality technological products, but it is also the maintaining its record of having innovation in its product line. In addition to this, the company is flexible to adopt any technological change in the market on an immediate basis,which is the best aspect that the customers like about the company, because they want change immediately with an  in technology.

Issues with the Company

Cisco Systems is a world leader in networking. The company’s networking solutions connect people, computer networks and computing devices, enabling people to transmit and access information regardless of their location, time and type of computer system. Investor Adam Stark’s plan is to evaluate the strategy as well as the stability of the Cisco Systems. In March 2016, the company was able to have a better prediction of cash flows for the upcoming years, using its income statement and other financial data.

He also decided to use time series analysis to evaluate the company’s performance in the near future, but he is very hesitant regarding how to proceed if the previous company’s data lacks the predictability analysis of performance or future operations. In particular, the investor would like to know how he would assess the likelihood that the business will generate similar income as in the previous quarter, in the following quarter. In addition to this, it is better for investors to understand the negative risks of investment value. Time series data analysis or trend analysis will be used as tools for historical data to predict the future data. By doing so, investors have always hoped to use their analytical skills to predict the future cash flow trends.

Target Market of the Company

The target market of Cisco Corporation could be divided into three segments, which include: enterprises, which are the Large Organizations with complex needs for networking. The enterprise customers include: educational institutions, utilities, government agencies and corporations. Additionally, the company offers its products and services to the Service Providers, which offer information services, including: wireless communication providers, cable companies and Internet Service Providers and telecommunication carriers. Furthermore, the company offers its services to Small/Medium Businesses who are in the need of data network.

Ratio Analysis

The Gross profit margin of Cisco System Inc. increased by 62% in the year 2016 as compared to 2015. This indicates that the company is financially healthy as more money (cash) is left after deducting the cost of goods sold from the revenue.

The organization achieved an operating profit margin of 28% as compared to 22% achieved in 2015, which indicates that the business is generating an adequate operating income in order to pay off its interest and taxes.

The business’s return on equity has declined to 5% as compared to 15% in 2015, which shows that the business has earned fewer profits from its equity investments as compared to 2015. This might be an alarming factor for the investors, as the company is not deploying the shareholder’s capital, effectively…………

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