Cash Flow Statement Flashcards
Structure of Cash Flow Stement
- Cash from operations
- Cash from investing
- Cash from financing
Cash flows from operations
Net income Starting point (indirect method)
+ Depreciation & amortization –After net income, the second line is usually the addback of D&A, which is embedded in COGS and operating expenses on the I/S thus reducing net income
-Increases in working capital assets (i.e. A/R, inventory, prepaids, other current assets)
+ Increases in working capital liabilities (i.e. A/P, accrued expenses, other current liabilities)
+/-Other items
+ Impairments
-Gains on sale of assets
+ Stock based compensation
-Increases in deferred tax assets
+ Increases in deferred tax liabilities
= Cash flows from operations
Cash from investing (CFI)
Def: The CFI section tracks additions and reductions to fixed assets and investments during the year (primarily long-term assets):
Items:
- Capital expenditures (cash outflow)
- Purchases of intangible assets (cash outflow)
- Asset sales (cash inflow)
- Purchases and sales of investments (cash outflow/inflow)
Cash from financing(CFF)
Def: The CFF section tracks changes in the company’s sources of debt and equity financing (primarily liabilities and equity items)
Items:
- Issuance / repayment of debt (cash inflow / outflow)
- Common stock issued / repurchased (cash inflow / outflow)
- Payment of common & preferred dividends (cash outflow)
CFS as magnyfying glass
CFS identifies the year-over-year change of every B/S line item that affects cash
- CFO captures the impact oof retained earnings, current assets, and current liabilities (and D&A part of fixed assets)
- CFI captures the impact of longt-term assets
- CFF captures the impact of long term liabilities and equity