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1、http:/ (企管培训资料下载) Cash Flow AnalysisSession 6Date1Cash Flow Analysishttp:/ (企管培训资料下载) This session How to calculate and analysis a corporations Cash Flow analysis How to evaluate the solvency of a company based on its balance sheet and cash flowsDate2Cash Flow Analysishttp:/ (企管培训资料下载) In case you m
2、issed the last session.We covered . I&E Balance Sheets The linkages between I&E and Balance SheetsDate3Cash Flow Analysishttp:/ (企管培训资料下载) Business Challenges Earn Profits Convert Profits to Cash as Fast as PossibleDate4Cash Flow Analysishttp:/ (企管培训资料下载) Cash Flow From Operating Activities From Inv
3、esting Activities From Financing ActivitiesDate5Cash Flow Analysishttp:/ (企管培训资料下载) Balance SheetAssetsCash+Accounts Receivable+Inventory+Prepaid Expenses+Property, Plant & Equipment+Accumulated Depreciation= Total AssetsLiabilities & EquityAccounts Payable+ Accrued Operating Expenses+ Accrued Inter
4、est Payable+ Income Tax Payable+ Notes Payable+ Capital stock+ Retained Earnings= Total Liability & EquityCash Flow StatementCash Flow From Operating Activities Net Income - Accounts Receivable Increase - Inventory Increase - Prepaid Expenses Increase + Depreciation Expense - Accounts Payable Increa
5、se - Accrued Expenses Increase - Income Tax Payable= Cash Flow form Operating Activities+ Cash Flow From Investing Activities Purchases of Property, Plant & Equipment+ Cash Flows From Financing Activities Short-Term Debt Borrowing + Long-Term Debt Borrowing + Capital Stock Issue + Dividends Paid to
6、Stockholders= Increase in Cash for YearBalance Sheet / Cash Flow Interactions Date6Cash Flow Analysishttp:/ (企管培训资料下载) Cash Flow From OperationsBalance Sheet last yearBalance Sheet this yearIncome & Expense this yearChanges in the Balance sheet “closets plus the depreciation adjusted incomeDate7Cash
7、 Flow Analysishttp:/ (企管培训资料下载) Cash Flow from OperationsProfit (“the bottom line” of the I&E Statement) Plus 7 year-to-year change adjustments (Balance Sheet) Accounts receivable Inventory Prepaid expenses Depreciation Accounts Payable Accrued Expenses Income Tax PayableCash flow, like the Balance
8、Sheet uses CASH ACCOUNTING Not ACCRUAL ACCOUNTINGDate8Cash Flow Analysishttp:/ (企管培训资料下载) Operating Cash Flow Comments Net Income is from the bottom line of I&E Statement (Depreciation Adjusted) Increases in Operating Assets decrease cash flow from profit (AR, Inventory, Prepaid Expenses) Increases
9、in liabilities “help” cash flow (AP, Accrued Expenses, Income Tax Payable)Date9Cash Flow Analysishttp:/ (企管培训资料下载) Growth Consumes Ca$h! Increasing revenue with controlled expenses will result in increased profits Revenue increases also drive increases in operating assets Cash increases are not as l
10、arge as profit increases but are delayed because of AR Declining businesses experience opposite effect and can experience increased “cash flow” over profit changes Date10Cash Flow Analysishttp:/ (企管培训资料下载) Depreciation & Operating Cash Flow Depreciation: Since the company paid cash for the fixed ass
11、ets when it bought them, the company does not consume cash a second time when it uses them The depreciation of the I&E Statement is therefore “added back” for cash flow purposes Date11Cash Flow Analysishttp:/ (企管培训资料下载) Balance SheetAssetsCash+Accounts Receivable+Inventory+Prepaid Expenses+Property,
12、 Plant & Equipment+Accumulated Depreciation= Total AssetsLiabilities & EquityAccounts Payable+ Accrued Operating Expenses+ Accrued Interest Payable+ Income Tax Payable+ Notes Payable+ Capital stock+ Retained Earnings= Total Liability & EquityCash Flow StatementCash Flow From Operating Activities Net
13、 Income - Accounts Receivable Increase - Inventory Increase - Prepaid Expenses Decrease + Depreciation Expense - Accounts Payable Increase - Accrued Expenses Increase = Cash Flow form Operating ActivitiesCash Flow From Investing Activities - Purchases of Property, Plant & EquipmentCash Flows From Fi
14、nancing Activities + Short-Term Debt Borrowing + Long-Term Debt Borrowing + Capital Stock Issue - Dividends Paid to Stockholders= Increase in Cash for YearBalance Sheet / Cash Flow Interactions Date12Cash Flow Analysishttp:/ (企管培训资料下载) Purchases of Property, Plant & Equipment Fixed Assets to moderni
15、ze or expand capacity Will be capitalized (depreciated)Date13Cash Flow Analysishttp:/ (企管培训资料下载) The Depreciation Story Capital assets are a cash flow out when the asset is bought (Cash Flow/Investing) The bought assets are added to the Property, Plant & Equipment line of the Balance Sheet The appropriate depreciation is allocated for in the period that it is “used” on the I&E The sum of the accumulated depreciations from the I&E is subtracted from the purchase price of t
