how a company appropriates money or invests its cash is monitored closely by market participants investors watch to determine whether a company is using its cash effectively to build shareholder value or whether the company is engaged in frivolous use of its cash which can lead to the destruction of shareholder value 
monitoring corporate appropriationsinvestors monitor corporate appropriations of cash by analyzing a company s cash flow statement the cash flow statement cfs measures how well a company manages its cash position meaning how well the company generates cash to pay its debt obligations and fund its operating expenses the cash flow of a company is divided into three activities or behavior example of company appropriationsbelow is the cash flow statement for exxon mobil corporation xom from sept 30 2018 as reported in its 10q filing the cash flow statement shows how the executive management of exxon appropriated the company s cash and profits whether exxon s use of cash is effective or not is up to investors and analysts to debate since evaluating the process of appropriating cash is highly subjective some investors might want more money allocated to dividends while other investors might want exxon to allocate money towards investing in the future of the company by purchasing and upgrading equipment appropriations vs appropriated retained earningsappropriated retained earnings are retained earnings re that are specified by the board of directors for a particular use retained earnings are the amount of profit left over after a company has paid out dividends retained earnings accumulate over time similar to a savings account whereby the funds are used at a later date appropriated retained earnings can be used for many purposes including acquisitions debt reduction stock buybacks and r d there may be more than one appropriated retained earnings accounts simultaneously typically appropriated retained earnings are used only to indicate to outsiders the intention of management to use the funds for some purpose appropriation is the use of cash by a company showing how money is allocated and appropriated retained earnings outlines the specific use of that cash by the board of directors limitations of an appropriationfor investors the cash flow statement reflects a company s financial health since typically the more cash that s available for business operations the better however there are limitations to analyzing how money is spent an investor won t know if the purchase of a fixed asset for example is a good decision until the company begins to generate revenue from the asset as a result the investor can only infer whether the management is effectively deploying or appropriating its funds properly sometimes a negative cash flow results from a company s growth strategy in the form of expanding its operations by studying how a company allocates its spending and uses its cash an investor can get a clear picture of how much cash a company generates and gain a solid understanding of the financial well being of a company 