Cash Flow Statements Flashcards
Operating Cash Flows (CFO)
\+ cash rec'd from customers \+ cash dividends received \+ cash interest received \+ other cash income - payments to suppliers - cash expenses (wages, etc) - cash interest paid - cash taxes paid
Investing Cash Flows (CFI)
+ sale proceeds from fixed assets
+ sale proceeds from debt & equity investments
+ principal received from trading securities
- acquisition of fixed assets (PP&E)
- acquisition of debt and equity investments
- loans made to others
Financing Cash Flows (CFF)
\+ principal amounts of debt issued \+ proceeds from issuing stock - principal paid on debt - payments to reacquire stock - dividends paid to shareholders
Non-cash Investing and Financing Activities
*disclosed in footnotes
converting debt or preferred equity into common equity
assets acquired under capital leases
purchase of assets via issuance of debt/equity
exchanging one non-cash asset for another
stock dividends
Interest received (CFs)
US GAAP = CFO
IFRS = CFO or CFI
Interest Paid (CFs)
US GAAP = CFO
IFRS = CFO or CFF
Dividends Received (CFs)
US GAAP = CFO
IFRS = CFO or CFI
Dividends Paid (CFs)
US GAAP = CFF
IFRS = CFO or CFF
Taxes Paid (CFs)
US GAAP = CFO
IFRS = CFO or CFI & CFF
Bank Overdraft (CFs)
US GAAP = CFF
IFRS = n/a (part of cash and cash equivalents)
Direct Method of calculating CFO
identify actual cash inflows and outflows
Indirect Method of calculating CFO
begin with net income and make necessary adjustments to get operating cash flow
= net income - depreciation + non-cash charges - working capital investment
Cash Outflow (Use of Cash)
= increase in asset account
= decrease in liability accounts
Cash Inflow (Source of Cash)
= decrease in asset account
= increase in liability account
Operating activities
relate to firm’s current assets and current liabilities
Investing activities
relate to the firm’s noncurrent assets
Financing activities
relate to the firm’s noncurrent liabilities and equity
Free Cash Flow to the Firm (FCFF)
cash available to all investors
= net income \+ noncash charges (depreciation/amortization) \+ Interest expense x (1 - tax rate) - fixed capital investment - working capital investment
OR
= CFO + Int(1 - tax rate) - fixed cap inv
Free Cash Flow to Equity (FCFE)
cash flow available for distribution to common shareholders
= CFO - fixed cap inv + debt issued - debt repaid
