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1、CashFlowAnalysis Session6 Thissession HowtocalculateandanalysisacorporationsCashFlowanalysisHowtoevaluatethesolvencyofacompanybasedonitsbalancesheetandcashflows Incaseyoumissedthelastsession Wecovered I EBalanceSheetsThelinkagesbetweenI EandBalanceSheets BusinessChallenges EarnProfitsConvertProfitst
2、oCashasFastasPossible CashFlow FromOperatingActivitiesFromInvestingActivitiesFromFinancingActivities BalanceSheetAssetsCash AccountsReceivable Inventory PrepaidExpenses Property Plant Equipment AccumulatedDepreciation TotalAssetsLiabilities EquityAccountsPayable AccruedOperatingExpenses AccruedInter
3、estPayable IncomeTaxPayable NotesPayable Capitalstock RetainedEarnings TotalLiability Equity CashFlowStatementCashFlowFromOperatingActivitiesNetIncome AccountsReceivableIncrease InventoryIncrease PrepaidExpensesIncrease DepreciationExpense AccountsPayableIncrease AccruedExpensesIncrease IncomeTaxPay
4、able CashFlowformOperatingActivities CashFlowFromInvestingActivitiesPurchasesofProperty Plant Equipment CashFlowsFromFinancingActivitiesShort TermDebtBorrowing Long TermDebtBorrowing CapitalStockIssue DividendsPaidtoStockholders IncreaseinCashforYear BalanceSheet CashFlowInteractions CashFlowFromOpe
5、rations BalanceSheetlastyear BalanceSheetthisyear Income Expensethisyear ChangesintheBalancesheet closetsplusthedepreciationadjustedincome CashFlowfromOperations Profit thebottomline oftheI EStatement Plus7year to yearchangeadjustments BalanceSheet AccountsreceivableInventoryPrepaidexpensesDepreciat
6、ionAccountsPayableAccruedExpensesIncomeTaxPayable Cashflow liketheBalanceSheetusesCASHACCOUNTINGNotACCRUALACCOUNTING OperatingCashFlowComments NetIncomeisfromthebottomlineofI EStatement DepreciationAdjusted IncreasesinOperatingAssetsdecreasecashflowfromprofit AR Inventory PrepaidExpenses Increasesin
7、liabilities help cashflow AP AccruedExpenses IncomeTaxPayable GrowthConsumesCa h IncreasingrevenuewithcontrolledexpenseswillresultinincreasedprofitsRevenueincreasesalsodriveincreasesinoperatingassetsCashincreasesarenotaslargeasprofitincreasesbutaredelayedbecauseofARDecliningbusinessesexperienceoppos
8、iteeffectandcanexperienceincreased cashflow overprofitchanges Depreciation OperatingCashFlow Depreciation Sincethecompanypaidcashforthefixedassetswhenitboughtthem thecompanydoesnotconsumecashasecondtimewhenitusesthemThedepreciationoftheI EStatementistherefore addedback forcashflowpurposes BalanceShe
9、etAssetsCash AccountsReceivable Inventory PrepaidExpenses Property Plant Equipment AccumulatedDepreciation TotalAssetsLiabilities EquityAccountsPayable AccruedOperatingExpenses AccruedInterestPayable IncomeTaxPayable NotesPayable Capitalstock RetainedEarnings TotalLiability Equity CashFlowStatementC
10、ashFlowFromOperatingActivitiesNetIncome AccountsReceivableIncrease InventoryIncrease PrepaidExpensesDecrease DepreciationExpense AccountsPayableIncrease AccruedExpensesIncrease CashFlowformOperatingActivitiesCashFlowFromInvestingActivities PurchasesofProperty Plant EquipmentCashFlowsFromFinancingAct
11、ivities Short TermDebtBorrowing Long TermDebtBorrowing CapitalStockIssue DividendsPaidtoStockholders IncreaseinCashforYear BalanceSheet CashFlowInteractions PurchasesofProperty Plant Equipment FixedAssetstomodernizeorexpandcapacityWillbecapitalized depreciated TheDepreciationStory Capitalassetsareac
12、ashflowoutwhentheassetisbought CashFlow Investing TheboughtassetsareaddedtotheProperty Plant EquipmentlineoftheBalanceSheetTheappropriatedepreciationisallocatedforintheperiodthatitis used ontheI EThesumoftheaccumulateddepreciationsfromtheI Eissubtractedfromthepurchasepriceoftheassetsonthebalanceshee
13、tTheallocatedI Edepreciationis addedback totheIncomeintheCashFlowanalysis BalanceSheetAssetsCash AccountsReceivable Inventory PrepaidExpenses Property Plant Equipment AccumulatedDepreciation TotalAssetsLiabilities EquityAccountsPayable AccruedOperatingExpenses AccruedInterestPayable IncomeTaxPayable
14、 NotesPayable Capitalstock RetainedEarnings TotalLiability Equity CashFlowStatementCashFlowFromOperatingActivitiesNetIncome AccountsReceivableIncrease InventoryIncrease PrepaidExpensesDecrease DepreciationExpense AccountsPayableIncrease AccruedExpensesIncrease CashFlowformOperatingActivitiesCashFlow
15、FromInvestingActivities PurchasesofProperty Plant EquipmentCashFlowsFromFinancingActivities Short TermDebtBorrowing Long TermDebtBorrowing CapitalStockIssue DividendsPaidtoStockholders IncreaseinCashforYear BalanceSheet CashFlowInteractions CashFromFinancingActivities Whenoperatingcashflowsareinsuff
16、icienttofundcompanyoperations thefinancedepartmentmustraisecashforthecompanyLoansLineofcredit short termdebt Notes BondsorDebentures long termdebt IssueStockDividendspaidtoStockholdersareconsideredafinancingcashflow IBM2001CashFlow M CashFlowFrom 200120001999Operations14 2659 27410 111Investing 6 106 4 248 1 669 Financing 5 309 6 359 8 625 Exchangeratechanges 83 1470 149 NetChangeinCash2 767 1 480 332 Cashon1 13 5635 0435 375Cashon12 316 3303 5635 043Daysofcash301623 IBM2001CashFlowfromOperation
