Chapter 4 - Cash Flow Statement Analysis

Question 1

What three activities are the Cash Flow Statement divided into?

Answer 1

Operating activities
Investment activities
Financing activities

Question 2

How is the Net Cash Flow (NCF) calculated?

Answer 2

Operating Cash Flow (OCF) + Investment Cash Flow (ICF) + Financing Cash Flow (FCF)

Question 3

How is the Operating Cash Flow (OCF) calculated?

Answer 3

OCF = capacity of self-financing (cashable income) - change in WCR

Question 4

What cash flows do we experience from the balance sheet?

Answer 4

Fixed assets: disposal (+)/acquisition (-)

WCR: positive changes (-)/negative changes (+)

Financial debt: borrowing (+)/repayment (-)

Equity: increase in CSF(+)/increase in capital (+)/dividends (-)

Question 5

What are the two ways to calculate the Cash Flow?

Answer 5

Funds-flow statement: balance sheet logic prevails, outflow and inflows divided into two sections

Cash Flow statement: flow ordered according to nature (the 3 activities)

Question 6

How is the Cash Flow calculated?

Answer 6

OA (I) = capacity of self-financing - changes in WCR
IA (II) = CapEx + DISP
FA (III) = REPAY + BOR - DIV + changes in capital

Changes in cash = I + II + III + initial net cash = final cash

Question 7

How do you calculate the FCF?

Answer 7

EBIT
- tax
\+ DA
- CapEx
-∆WCR