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1、On Project Report/Readings,Market value, use number of shares outstanding, do not use average number of shares outstanding Identify source of data or quotes Common size analysis, show amounts and percentages Only analyze notes that are related to our current lecture Take turn to write the report, do
2、 not leave to one person In final exams, I may provide you with raw materials and a sample article from our readings for you to analyze the raw materials and write a similar article. So get familiar with all articles. Again, understand but do not memorize.,Firm Names,Eagle Eye: Valuation Analysis St
3、rategy Investorium,Statement of Cash Flow,Cash flow from Operating activities: （营运活动） cash receipts from customers cash disbursed to: suppliers of merchandise employees for salaries Cash flow from investing activities: （投资活动） purchase of buildings, equipments, plants proceeds (进帐）from sales of long
4、term assets Cash flow from financing activities: （融资活动） borrowing/repay long term debts issuing new shares,Overview of the Statement of Cash Flows,In AOL 2000 balance sheet, cash and cash equivalent increased from $936 millions to $2,490 millions. How? The statement of cash flows (a) explains the re
5、asons for a change in cash. (b) classifies the reasons for the change as an operating, investing or financing activity. (c) reconciles net income with cash flow from operations.,Montgomery Ward b.f. bankrupt,The difference between earnings and cash flows,I/S Explain change in retained earnings I/S i
6、s accrued-based I/S recognize property rights I/S require estimates I/S is an opinion I/S is prone to (易于）manipulation Firms can survive a long string（长串） of negative earnings,SCF explain change in cash and cash equivalent N/A SCF emphasize “actual possessment” SCF does not SCF is a fact SCF is so t
7、o a much less degree Firms go bankrupt with a long string of negative cash flows (outflow),Cash flow equation,A = L + E A =L+E cash +non-cash A = L+ E cash + current A (other than cash) +non-current A= current L+ non-current L+ E cash = current L+ non-current L+ E - current A (other than cash) -non-
8、current A,Cash flow from operation,Cash flows related to selling goods and services; that is, the principle business(主营业务) of the firm The main source of payoffs to shareholders and creditors The reason for the firms to exist If firms do not in the long run generate more cash from operation than the
9、 returns of funds to shareholders and creditors, the firms go bankrupt,Cash flow from operation-components,Cash collected from customers Cash collected as interest (利息）on loans to others Cash collected as dividends （股利）on investment on other firms stocks Cash paid to suppliers Cash paid to employees
10、 Cash paid to other service providers: landlords, marketing agency, auditors, consultants, Cash paid to government Cash paid to creditors as interest on borrowed money,Cash flow from investing activities,Cash flows related to the acquisition or sale of non-current assets: investment, land, property,
11、 plants, equipments To maintain the current productivity of the operation, a firm must replace assets that they wear out (消耗） To grow its operation, a firm must acquire additional assets Old assets may be sold as they become obsolete (过时）, or as the firm change production Investing activities thus p
12、rovide resource to generate cash flow from operations,Cash flow from investing activities-components,Cash received from sales of land, investment, property, plants and equipment Cash paid to acquire land, investment, property, plants and equipment,Cash flow from financing activities,Cash flows relat
13、ed to long-term liabilities and owners equity The source of cash to be used in investing and operating activities Two sources: shareholders and creditors This part of SCF also indicates how much cash the firm returns to its capital providers, i.e., cash distribution to shareholders and creditors Not
14、e: short-term liabilities generated in operation, such as account payable, is not related to this category,Cash flow from financing activities-components,Cash received from issuing corporate debts or taking up loans Cash received from issuing common shares or preferred shares Cash paid to repay debt
15、s or loans Cash paid to repurchase shares Cash paid to shareholders as dividends,Relations among the cash flows from the three categories of activities,1,CF from Fin. Act.,CF from Inv. Act,CF From Op. Act.,Free Cash Flow,= Cash flow from operating activities + Cash flow from investing activities If
16、positive, normal operation generates more cash that it consumes, such as the case of a stable firm If negative, normal operation generates insufficient amount of cash to be self-sustaining, such as a growing firm,Two methods to prepare the operating portion of SCF,Direct method of presentation calculates cash flow from operations by subtracting cash disbursements to supplies, employees, and others from cash receipts from customers. The indirect method calculates cash flow from operations by adju
