Eastman Kodak

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Eastman Kodak Cash Flow Statement

Published December 16, 2013 by Mayrbear's Lair

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Early last week, I revealed the significance and meaning of cash flow statements. As we discovered, a corporation’s cash flow statements reveal a company’s ability to generate and allocate working capital. In fact Tracy and Tracy (2012) describe the movement of a company’s cash flow as the bloodline of a business due to its continual need to keep in circulation to avoid fatality (Tracy & Tracy, 2012). The focus of this post is a continuation of the analysis work of the Kodak Corporation’s financial condition provided from the data contained within their 2007 Annual Report. The analysis will reveal how well they managed their working capital. The study will also examine the following components that are contained within the cash flow statement: (a) the changes in balances that occurred with respect to Kodak’s assets and liability accounts such as inventory, accounts receivable, supplies, insurance, accounts payable and other unearned revenues; (b) adjustments that occurred as a result of their investing activities which include the purchase and sale of long term investments, equipment, and property; (c) changes that transpired from Kodak’s financing activities that also had an effect on the balances of long term liability and stockholders’ equity accounts due to such items as deferred income taxes and stock activity; and (d) the supplemental information provided from the notes that report the exchange of important items that did not involve cash such as income taxes and interest paid all of which may have had an effect on the flow of their working capital. The findings of this research will conclude that Kodak’s cash management strategies were effective in keeping enough operating capital available needed to operate during that time.

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The Significance of Cash Flow Statements

Companies risk running out of money and can go bankrupt without effective cash management strategies in place; plain and simple. Cash flow statements act as a tool to help analysts assess a company’s ability to generate and disperse their working capital. Friedlob and Plewa (1995) assert that in order for a company to run efficiently, they must budget their cash flow operations. Managing cash flow is a complex issue that requires today’s cash managers to have general knowledge in accounting practices and the ability to develop effective networking skills because of their extensive involvement in the company’s banking relationships, investment decisions, and forecasting decisions. For example, managing cash inflow from sales require that cash managers know how to extend credit and collect revenue so that it can be used effectively for functions like: (a) accelerating cash receipts to move cash faster using methods like fast bill pay, offering cash discounts and electronic transfers; (b) the planning and delaying of disbursements to gain the maximum use of cash; (c) forecasting cash inflows and outflows to avoid such events like overdrafts, deficiencies, and late payments; (d) investing idle cash to convert excess cash into short-term investments and back into cash again when they are needed; (e) reporting cash balances to make it convenient for managers to monitor and determine a company’s cash position; and (f) monitoring the cash flow system to assess whether the system is operating as designed and that goals are being achieved (Friedlob & Plewa, 1995). To ensure the cash is being used efficiently, managers require skills to help them maximize the earning potential of their organization and cash flow statements serve as tools that help them monitor and manage working capital.

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Kodak Annual Report Cash Flow Statement Analysis

An analysis of Kodak Company’s cash flow statement will reveal their ability to generate and disperse working capital they acquired from their operating, investing, and financing activities during a specified accounting period. Fraser and Ormiston (2010) explain that cash flow statements reveal the absolute dollar amounts of a company’s various accounts and are prepared by calculating all of the changes that are reflected in the balance sheet accounts, including cash; then itemizing those adjustments into cash flow categories to reflect the changes in their operating, financing, and investing activities (Fraser & Ormiston, 2010). For example, a quick overview of Kodak’s Cash Flow Statement (see Exhibit A) shows that in 2005, Kodak generated $1,208 (in the millions) from operating activities that decreased about 21% in 2006 to $956 and then took a dramatic 67% drop in 2007 when they only showed that $314 was generated in cash from their operating activities. In addition, the cash statement reveals that the income generated during each of those years was reflected as a loss. In fact a closer look reveals that changes in cash occurred with positive balance results not from income that was generated, but were due to the adjustments that were made with respect to depreciation and amortization, restructuring and impairment charges, as well as increases in receivables and inventories that were reported. Regardless of the losses from income reported each year, the statement revealed that Kodak’s operating activities during that accounting period showed they generated enough cash to cover their outflow leaving them a positive ending balance each year.

Kodak’s cash flow statement also disclosed that in 2005, the net cash they collected from investing activities was reported as a loss of $1,304, (in the millions) but in 2006, they only showed a loss of $225. This means the cash they received from investing activities jumped up about 83%. In 2007 they reported a considerable profit gain of $2408. A closer look at the statement to identify the source of that gain points to their other investing activities provided from the financial notes of the report, that explained the gain was due to proceeds Kodak received from the sale of the Health Group and HPA businesses. In the meantime, the statement also shows that in 2005 the cash generated from Kodak’s financing activities revealed a profit of $533 while in 2006 those figures plummeted about 170% when they reported a loss of $947. The numbers dived even further in 2007, however, when they showed a 235% loss of $1,280.  The report revealed those losses were due to the payment of long term borrowing debt and shareholder dividends.

A general overview of the figures reported on Kodak’s cash flow statement revealed that the totals for operating, investing, and financing activities all showed positive balances at the end of each of those years. For example, in 2005 they showed a balance of $1665 that dropped down about 12% in 2006 to $1469. In 2007 however, the cash balance at the end of that year was reported at $2,947 which reflected an impressive increase of about 101% in only one year. This result occurred due to the profits Kodak generated from their investing activities and not because of their operating or financing activities with both reported considerable cash losses.

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Conclusion

Without the use of cash flow statements, businesses risk running out of money and going bankrupt. The Kodak Company’s cash flow statement disclosed that the increases and decreases which occurred had an effect on how the company utilized their working capital that were produced from their operating activities and highly liquid short-term marketable securities, that were also considered cash equivalents. In analyzing the figures on the statement strategists could assess Kodak’s financial condition to make more effective decisions about: (a) their ability to generate future cash flow, (b) their capability to meet their cash obligations, (c) what their future external financial needs might be, (d) their success and productivity in managing their investment activities, and (e) Kodak’s effectiveness in implementing financing and investment strategies. The findings of this research disclosed that Kodak was effective during that time with their investing strategies that but that they were struggling to show considerable profit gains from their operating and financing activities. The assessment of the cash flow statement that was conducted, deduced that the Kodak Company was effective at generating and allocating working capital during that accounting period because of their investing activities, however, more productive results were required from their operating and financing activities in order to help them maneuver the organization into a better position to achieve more profitable results.

Appendix A

Assignment 4 Exhibit A

(Kodak, 2008)

References

(2008). Kodak. Washington: Securities and Exchange Commission.

Averkamp, H. (2013). Cash flow statement. Retrieved November 21, 2013, from Accounting Coach: http://www.accountingcoach.com/cash-flow-statement/explanation/1

Fraser, L., & Ormiston, A. (2010). Understanding financial statements. Pearson Education.

Friedlob, G., & Plewa, F. (1995). Understanding cash flow. New York, NY: John Wiley & Sons, Inc.

Tracy, J., & Tracy, T. (2012). Cash flow for dummies. Hoboken, NJ: John Wiley & Sons, Inc.

Eastman Kodak Income Statement Analysis

Published December 13, 2013 by Mayrbear's Lair

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This blog is a continuation of my examination of Kodak’s 2007 Annual Report with focus on understanding the information contained in their income statement. A company’s income statement summarizes their revenue and expenditures to reveal whether the organization is operating at a profit or loss. The income statement is a significant financial document in Kodak’s Annual Report because it discloses the top and bottom line earnings which give shareholders more information about the company’s profitability (Understanding the income statement, 2011). By analyzing this statement closely, investors can determine whether the company is operating efficiently or whether they are struggling to keep their doors open. This research will take a closer look at the annual report’s income statement to understand Kodak’s financial condition during that time to determine whether they were operating effectively and to assess their future. The study will include an analysis of the net sales figures and cost of goods to help determine their gross profit ratios. In addition the research will examine the company’s operating profit figures to identify their source of revenues and assess their profit margin levels. The findings of this research will conclude that although Kodak continued to operate at a loss in 2005 and 2006, by 2007, they revealed they still had some life left in them when their records reflected that they finally had a profitable year.

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Understanding the Income Statement

As I mentioned, income statements are important to investors because they summarize a company’s revenue and expenditures. Fraser and Ormiston (2010) suggest that the information reported on income statements can help investors determine the financial performance of an organization, but points out it is only one of many components that comprise the financial statement package to help paint a true picture of how well a company is being managed (Fraser & Ormiston, 2010). Income statements are reported in two common formats: (a) a multi-step configuration that includes a variety of profit measures including gross revenue, operating profits, and before tax earnings; and (b) a single step format that combines all revenue items and expense deductions to reveal net income figures. In addition, special categories like discontinued operations and extraordinary transactions are also included on these documents so that analysts have more information to understand the broad landscape of an organization’s performance levels so that they can ascertain how efficiently the company is being managed.

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Kodak Income Statement Findings

Without income statements it is difficult for business owners to monitor and control expenditures. Ittelson (2009) postulates income statements are important because they reveal such information like how costs are spent for material and labor to create a product and whether the expenses that are allocated to develop, sell, and account for their products brings in enough revenue to cover the cost of their investments (Ittelson, 2009). For example, Kodak’s income statement (see Exhibit A) indicates that during the accounting period from 2005 to 2007 net sales continued to plummet. In 2005, they reported net sales figures of $11,395 (in the millions) which decreased by 7% in 2006 ($10,568) and dipped even lower in 2007 ($10,301) when figures dropped down another 3%. This means that during that three year accounting period, Kodak’s sale figures dropped a total of almost 10%. In the meantime, the net profit figure during that three year period showed significant changes. For instance, in 2005, net profit numbers indicate that Kodak experienced a loss of $1,261 (in the millions). In 2006, net profit outcomes still showed that the firm was operating at a loss ($601) however, the loss revealed a 52% increase from the loss they reported the previous year. That means that although the company was still losing money, it was not as significant as the prior year. Finally, in 2007, Kodak reported a profit for first time during that accounting period of $676. This indicates the Kodak Company experienced a 153% increase in net profits during that three year period. Those are impressive figures and at first glance can give shareholders hope. Upon closer examination, however, the income statement reveals that the increase in net profit was due to discontinued operations. This means that Kodak did not achieve their profit gains from net sales. In truth, their earnings were the result of selling off portions of the business, and in doing so by 2007 their bookkeeping records allowed them to report a net profit of $676.

Taking a closer look at Kodak’s gross profit figures in 2006, after the cost of goods were calculated, the numbers revealed a loss of 5% from that of 2005. In 2007, the gross profit amounts indicate an increase of about 4%, however the figures revealed Kodak earned a profit that year due to revenue they received from discontinued operations. In the meantime, the income statement disclosed their profit margins as well, which also help investors identify the real sources that contributed to the company’s revenue. For example, in 2005, Kodak’s profit margins for net sales were only 22%, rose slightly to 23% in 2006 and ended at 24% in 2007. This tells investors that the majority of net sales were allocated to honor Kodak’s debts and that the company was unable to achieve a large enough profit margin to make gains from net sales. The income statement also revealed that the reason Kodak reported a profit by 2007 was because of the revenue they received from discontinued operations. This scenario does not paint a stable operating picture of the company to help investors feel confident that Kodak could again become the highly profitable photo imaging giant it once was.

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Conclusion

Income statements reveal a company’s profits and overall financial condition. They help strategists determine whether a firm is operating in the red or in the black. Alvarez and Fridson (2011) explain that shareholders are looking to profit from their investments and maximize their wealth. Income statement analyses provide valuable information that determines whether a company is operating effectively by comparing the data from earlier periods. By examining the data on income statements investors can ascertain if a firm is stable enough to invest in. In addition, these statements provide information that lets analysts know whether a company’s profitability is highly sensitive to changes in material costs and labor that make up the cost of goods they sell (Alvarez & Fridson, 2011). Kodak’s income statements summarized the company’s revenue and expenditures during a three year period, providing ratio information that revealed it took the firm a few years to change their operating status from showing losses and that by the end of 2007, they finally experienced considerable gains in revenue to report a profit. However, a closer analysis of the income statement figures exposed that the revenue Kodak received was because of discontinued operations. In other words, the company showed a profit that year because they sold portions of the business and that during that accounting period, they did not report any operating profits. In conclusion, the findings of this research deduced that although the Kodak Company showed a profit in 2007, it was because the firm continued to sell off portions of the company not because of sales revenue. This suggests that the iconic organization wasn’t out of the woods financially during that time and still had a way to go before shareholders could consider it a profitable venture once again.

Exhibit A

 Assignment 3 Exhibit A

(Kodak, 2008)

References

(2008). Kodak. Washington: Securities and Exchange Commission.

Understanding the income statement. (2011, October 10). Retrieved November 15, 2013, from Investopedia.com: http://www.investopedia.com/articles/04/022504.asp

Alvarez, F., & Fridson, M. (2011). Financial statement analysis: A practioner’s guide. Hoboken, NJ: John Wiley & Sons, Inc.

Fraser, L., & Ormiston, A. (2010). Understanding financial statements. Pearson Education.

Ittelson, T. (2009). Financial statements: A step-by-step guide. Amazon Digital Services, Inc.

Eastman Kodak Balance Sheet Analysis

Published December 2, 2013 by Mayrbear's Lair

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A corporation’s balance sheet provides significant data about a company’s assets and liabilities and divulges the true nature of their financial condition. Makoujy (2010) contends that balance sheets are the financial statements which provide an overview of a company’s assets, liabilities, and stockholders’ equity. These documents disclose how much capital is brought into an organization and how it is allocated to satisfy the firm’s liabilities and owner’s equity commitments (Makoujy, 2010). This information is important for helping investors deduce a company’s risk levels by analyzing the profit and loss measurements they provide. It also gives creditors an indication of a firm’s financial condition from the short-term liquidity ratios they disclose. The focus of this research continues with the analysis work centered on the Kodak Company’s financial condition provided from their 2007 Annual Report. This study will take a closer look at the report’s balance sheets to reveal how strategists determine the firm’s net financial position by the information provided in the statements that summarize Kodak’s assets, liabilities, and owner’s equity. The research will disclose how the data from the balance sheets help investors and creditors in their financial decision making by examining the figures that revealed the truth about Kodak’s operating condition and overall net worth during that given point in time. The findings of this research, from evaluating the information provided in the Kodak Company’s balance sheet statements, will determine that the company’s overall financial condition and their stability as a business during that time was below par.

The Balance Sheet’s Function

The true nature of a company’s balance sheet that is provided their annual reports, serves to summarize the company’s assets, liabilities, and shareholder equity during a specified period of time. To understand these concepts more clearly, it is important to comprehend that all the possessions of a company (assets) are either owned free and clear (equity) or were purchased by acquiring debt (liability). To measure a company’s performance levels, Skonieczny (2012) asserts that their balance sheets must follow one important equation in that the total amount of assets must equal the total amounts of both the company’s liabilities and equity or net worth. In other words, the accounting figures of a balance sheet must mathematically balance out by adhering to the following equation:

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For example, when the Kodak Company makes a down payment for property, equipment, or any other expenditure meant to help with the operation of the firm, that payment would be classified as an example of equity. In the meantime, the mortgage payments on their facilities are considered a form of debt (Skonieczny, 2012). Balance sheets can be intimidating and difficult to comprehend for those who are not proficient in mathematics or are untrained and lack bookkeeping skills. To help those that are unfamiliar traverse safely through these accounting waters, one efficient instrument that is used for scrutinizing a balance sheet is the common-size balance sheet. Common-size balance sheets provide the same information only rather than disclosing the actual figures, the values are provided as percentages with a common denominator. This strategy enables investors and creditors to compare account sizes as percentage rates over a period of time. This kind of balance sheet is also ideal for helping investors identify and observe trends.

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Kodak Company’s Annual Report Findings

Even though they may be difficult to comprehend, balances sheets provide vital information that creditors use to measure a company’s short-term liquidity. Fraser and Ormiston (2010) postulate that the information provided on the balance sheet with respect to a company’s inventory is an important element in the examination of a company’s liquidity. This component is significant, for instance, because creditors can determine the ability of an organization to meet currency needs as they arise (Fraser & Ormiston, 2010). In addition these figures can offer insight as to how well a company is performing during a certain period in time. For instance, Kodak’s balance sheet (Exhibit A) indicates that in 2006 their current assets (including cash equivalents, short term investments, accounts receivable and inventories) totaled about $5.5 million, while in 2007 that figure rose to $6. However, the total assets reported in 2006 were much higher ($14.3 million) than they were in 2007 where it dropped down about a million dollars ($13.6 million). This indicates that the long-term assets values increased during that time period which may have resulted from the accumulated depreciation values.

Shareholders are interested in a company’s balance sheet because it provides valuable information that can help them determine a company’s risk levels. For example, Kodak’s balance sheet (Exhibit A) indicates that in 2007, their assets totaled about $14 million while their liabilities reflected a total amount of about $11 million. To help investors ascertain the ratio measurements they may look to a common-size balance sheet to give them a simpler overview of their financial condition. Using this strategy analysts would conclude that during that given period, the Kodak Company committed a substantive percentage (around 78%) of their total assets on meeting their debt obligations leaving only 22% that was allocated towards shareholder equity. Those figures are a slight improvement however, from 2006, whose figures during that year disclosed that the company committed 90% of their total assets to meet their debt requirements. To investors and creditors these figures represent a high level of risk and a clear indication that although they were making progress, the Kodak Company was still not in a healthy financial condition during this period in time.

Conclusion

Balance sheets measure a firm’s profitability and provide shareholders important information on current and future risk levels. It is for this reason that stockholders and owners require a system to help them measure a company’s performance levels in a periodic manner. The balance sheets help provide investors and creditors with information that allows them to determine whether a company is operating in a profitable manner which also helps them predict whether stock prices will rise or fall. A closer examination of the Kodak Company’s balance sheets indicates the risks they took were considerable. However, it also revealed that their strategies and cutbacks were slowly proving effective which allowed them to keep the company operational. In conclusion, the findings of this study’s assessment with respect to the Kodak Company’s balance sheet provided from their 2007 Annual Report, deduced that although the Kodak Company was making a valiant effort to maintain operations, they were still struggling in their efforts to achieve profitable goals during that given time.

Exhibit A

Kodak Balance Sheet Exhibit A Assignment 2

(Kodak, 2008)

References

(2008). Kodak. Washington: Securities and Exchange Commission.

Fraser, L., & Ormiston, A. (2010). Understanding financial statements. Pearson Education.

Makoujy, R. (2010). How to read a balance sheet: The bottom line. New York, NY: McGraw-Hill.

Skonieczny, M. (2012). The basics of understanding financial statements. Schaumburg, IL: Investment Publishing.

The Eastman Kodak Company 2007 Annual Report – Initial Analysis Conclusion

Published November 20, 2013 by Mayrbear's Lair

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Part one revealed Kodak’s rise to success. In this post, we look into the components that altered that status. Snyder (2013) asserts that many believed Kodak’s problems began when digital technology was introduced, his research, however, disclosed that their problems developed further back. For example, when Kodak competitor Polaroid introduced a camera that developed photos in sixty seconds, Kodak focused the energy of their R&D engineers to come up with a similar product. Their attempt to mimic another company’s technology not only tarnished their image, it caused them to lose focus on the market. This allowed Japan’s Fuji Corporation to slowly dominate the industry when they released a 400-speed film product before Kodak. Later, when Kodak introduced their version of the Polaroid instamatic camera, this copy-cat strategy resulted in a costly lawsuit that was filed and won by the Polaroid company for patent infringement (Snyder, 2013). In short, Kodak’s blind ambition, poor investment choices, and an attitude that they were too big fail, ultimately clouded their judgment. Consequently, every attempt they made to salvage the company’s image in hopes of reclaiming their title as a dominant force in the marketplace only cost them more as they continued their downward spiral and evidenced from the data reflected in the financial statements of their annual reports.

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Annual Report Findings

Even though PR fluff can try to disguise the true nature of a company’s operational health, the financial statements contained in their annual reports can help analysts discover the truth about a company’s financial condition and overall performance. Mattioli and Spector (2011) postulate, that in spite of their financial hardships, Kodak was committed to meet their obligations to suppliers and creditors (Mattioli & Spector, 2011). For example, an initial assessment of the 2007 Annual Report’s financial statements which include the (a) balance sheet, (b) income statement, and (c) cash flow balances, (see Exhibit A below) indicate that for the period from 2005 to 2007 Kodak was making a genuine effort to salvage their firm even though profits continued to steadily decline. In 2007, the gross profit figures of $2,516 (represented in millions for instance), were not far off from the figures reported in 2005 ($2,531). In the meantime, the balance sheet indicates that their assets showed an increase in value which could suggest they felt confident enough make further investments to continue moving forward with day-to-day operations.

The net profit figures from the income statements, however, suggest a drastic fluctuation during that three year period beginning by showing a loss of $1,261 net profit in 2005 (in the millions), another loss of $601 in 2006. and finally in 2007 they showed a gain in the amount of $676. Although this indicates profit rather than loss during that three year period, it still did not give shareholders confidence in the company’s performance outcomes. In the meantime, the cash flow figures confirm a steady decrease during that time which further confirmed that the company was not performing well. Signs of trouble in the Kodak Company were further apparent in that their stock activity also fluctuated considerably during that time. For instance, at the end of 2005, Kodak’s stock price was valued at $72.24 a share. In 2006, the stock went up to $81.33, perhaps because of their attempts to seek out loans to help build shareholder confidence. However, by the end of 2007, Kodak’s shares dropped lower than they were in 2005 to a mere $70.23 per share. This indicates that in spite of their efforts to resurrect the company, they were still struggling considerably.

The information gathered from Kodak’s financial statements, such as: (a) assets that dropped to a value of $13,659 from $14,320, (b) accounts payable liabilities went from $12,932 to $10,630, and (c) shareholder equities that decreased from $14,320 to $13,659, revealed that incoming revenue and shareholders’ equity showed a steady decrease during that accounting period.  Based on the findings of this initial analysis, these figures divulge that during that time, the Kodak Company did not exhibit the performance levels of a healthy enterprise.

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Conclusion

Comprehensive financial analyses help forecast a company’s financial health from the information provided in their annual reports. The significant financial data and ratios that are contained in them help provide strategists key information to determine industry trends. Friedlob and Welton (2008) assert that the key to understanding an annual report is that they are designed to help satisfy the needs of many individuals including shareholders, creditors, economists, analysts, and suppliers (Friedlob & Welton, 2008). The findings of this study revealed that Kodak Eastman’s financial troubles began years ago because company leaders lost sight on the key component that made them a giant in their industry: to provide innovative high quality products. Synder (2013) submits there many more reasons that led to Kodak’s slow demise which included such factors as: (a) their focus on copying Polaroid’s innovations, (b) their abandonment of the 35mm camera market, and (c) making costly acquisitions like Sterling Drug for $5.1 billion with no experience in managing a pharmaceutical company (Snyder, 2013). These short sighted decisions cost them greatly in the long run and were reflected in their overall performance outcomes revealed in the 2007 Annual Report which confirmed their slow and steady decline in revenue and stock equity. In addition, the legal proceedings section of the notes contained in the report indicates that they were involved in a variety of investigations and in various stages of litigation which analysts knew could also produce adverse effects on Kodak’s future financial condition.

The initial examination and assessment from the findings of this research conclude that the Kodak Company was financially unstable during that time and is supported by the declining numbers disclosed from their annual report. In short, the financial figures revealed that the entrepreneurial decisions corporate leaders made at the firm yielded unimpressive performance outcomes due to many factors, including: (a) tunnel vision strategies that were focused on out-maneuvering competitors, (b) exorbitant acquisitions with no experience in how to manage them, and (c) a costly lawsuits from Polaroid and others that helped tarnish their image. In the meantime, Eastman Kodak has been working diligently to find ways to salvage the strategic errors of leadership that led to their bankruptcy after 120 years of public service. Mourdoukoutas (2013) explains that since that time, Kodak sold a large portion of the business, their patent portfolio, and laid-off most of their staff members to lighten the debt they carried. In addition, their R&D division is now focused on creating new products which is what the company excelled at when it was initially founded (Mourdoukoutas, 2013). In the long run it would appear that Kodak’s over confidence and lack of effective leadership with innovative decision making may have played a role that resulted in their empire systematically crumbling and hopefully they are on the road to a more prosperous venture.

Exhibit A 

Cover sheet exhibit A

(figures provided from Eastman Kodak Company 2007 Annual Report, 2008)

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References

(2008). Eastman Kodak Company 2007 Annual Report. U.S. Federal Government, Securities and Exchange Commission. Washington: Securities and Exchange Commission.

Eastman Kodak Company. (2013). Retrieved November 1, 2013, from cobrands.hoovers.com: http://cobrands.hoovers.com/company/Eastman_Kodak_Company/rfhiff-1-1njhxk.html

Fraser, L., & Ormiston, A. (2010). Understanding financial statements. Pearson Education.

Friedlob, G., & Welton, R. (2008). Keys to reading annual report. Hauppauge, NY: Barron’s Educational Series.

Mattioli, D., & Spector, M. (2011, October 25). Eastman Kodak Seeks Rescue Financing. The Wall Street Journal, 4.

Mourdoukoutas, P. (2013, November 2). Can Eastman Kodak rise again? Retrieved November 3, 2013, from forbes.com: http://www.forbes.com/sites/panosmourdoukoutas/2013/11/02/can-eastman-kodak-rise-again/

Roth, R. (2008). The writers guide to annual reports. Atlanta, GA: Booksurge.com.

Snyder, P. (2013). Is this something George Eastman would have done? New York, NY: CreateSpace Independent Publishing.

The Eastman Kodak Company 2007 Annual Report – Initial Analysis Part 1

Published November 18, 2013 by Mayrbear's Lair

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A corporation’s annual report helps provide shareholders a glimpse into that company’s overall performance and financial effectiveness. Strategic analysts use this information to measure profit and loss as well as help forecast a company’s financial health by examining the significant data and financial ratios that are provided from these reports. Roth (2008) explains their purpose simply in that the job of a company’s annual report is to share their story as a unified message (Roth, 2008). To better comprehend a company’s financial health from their corporate annual reports, the focus of my ongoing research efforts throughout this six week journey will examine the various components contained within these financial tomes to help determine whether a company is sustainable or not. As an example to illustrate these concepts step-by-step, my analysis will include an ongoing examination of the 2007 Annual Report of the troubled Eastman Kodak Company – the photo imaging firm that was established in the late 1800s by George Eastman. To help present a clearer picture of the company’s activities and overall functionality, the study will draw information from the financial statements to evaluate such elements as assets, liabilities, and stockholders’ equity to help determine Kodak’s viability as a business. The findings of this research will disclose how the data obtained from the company’s annual report reveals significant information that can help strategists determine, plan, and forecast the firm’s overall performance and financial health.

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A Brief History of Kodak

The true nature of a company’s image can be ascertained through a comprehensive analysis that is provided by their annual reports. Fraser and Ormiston (2010) purport that in order to comprehend how to navigate through the vast amount of data provided in the annual reports, familiarity with accounting is helpful (Fraser & Ormiston, 2010). For the purpose of this research, to better understand where the Eastman Kodak company was headed, it is important to first understand how they emerged as a major player in the photo imaging industry. Kodak initially became successful when they introduced their first camera, a small easy-to-use device with film that took up to 100 photos. Soon after, they added the home movie camera, film, and projectors to their product line. By the early 1930s, Kodak dominated the marketplace when they introduced and released an innovative component called Kodachrome, a new technology that added the richness of color to their film products in 1935 (Eastman Kodak Company, 2013). This was a hugely successful entrepreneurial maneuver, one that secured their position at the top of their industry. Since that time they continued to expand with additional imaging technology items and services they added to their product line including inkjet printers, digital photo frames, printing kiosks, online imaging services, and scanners, to name a few.

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For many decades Kodak enjoyed enormous success and dominated the marketplace. However, over confident leadership, poor strategic planning, and a complacent attitude may have been the cause of their slow demise. Part two of this post will dive further into what may have caused Kodak’s financial problems and examine their report to give us clues.

Until then ….

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References

(2008). Eastman Kodak Company 2007 Annual Report. U.S. Federal Government, Securities and Exchange Commission. Washington: Securities and Exchange Commission.

Eastman Kodak Company. (2013). Retrieved November 1, 2013, from cobrands.hoovers.com: http://cobrands.hoovers.com/company/Eastman_Kodak_Company/rfhiff-1-1njhxk.html

Fraser, L., & Ormiston, A. (2010). Understanding financial statements. Pearson Education.

Friedlob, G., & Welton, R. (2008). Keys to reading annual report. Hauppauge, NY: Barron’s Educational Series.

Mattioli, D., & Spector, M. (2011, October 25). Eastman Kodak Seeks Rescue Financing. The Wall Street Journal, 4.

Mourdoukoutas, P. (2013, November 2). Can Eastman Kodak rise again? Retrieved November 3, 2013, from forbes.com: http://www.forbes.com/sites/panosmourdoukoutas/2013/11/02/can-eastman-kodak-rise-again/

Roth, R. (2008). The writers guide to annual reports. Atlanta, GA: Booksurge.com.

Snyder, P. (2013). Is this something George Eastman would have done? New York, NY: CreateSpace Independent Publishing.